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Full text of "Annual Report, Division of Insurance, 1975-82, 1987-88"

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https://archive.org/details/annualreportdiviOOmass 



Annual Report, 1975 
Division of Insurance 



State Library of Ma£sachus3f;s 
State House, Boston 




Sfafe House, Boston 



This report was produced pursuant to 
Chapter 175, Section 17 of The Massachusetts General Laws 



Michael S. Dukakis 
Governor of Massachusetts 



James M. Stone 
Commissioner of Insurance 



Massachusetts 
Division of Insurance 



Contents 

Progress Report 1 

Laws, Regulations & Decisions 5 

Laws 5 

Regulations 7 

Decisions 7 

Companies 9 

Financial Examinations 9 

Changes 10 

License Actions 11 

Receiverships 11 

Life Valuations 13 



Progress Report 



Beyond the normal performance of our statutory tasks in licens- 
ing, examinations, ratemaking and complaints handling, the efforts of 
the Division of Insurance in 1975 have been focused on the matters 
described below. 

I . Changes in the Operation of the Department 

Our principal goal in department management is the professional- 
ization of the staff. The department has long had more than ample 
budget and numbers of personnel, but it has traditionally been without 
depth in its critically important professional positions. This year 
has seen the following corrective measures: 

A. New Organizational Structure 

In past years, the Department has been organized such that at 
least a dozen disparate units have reported simultaneously to the Com- 
missioner. Early this year the structure was changed. One Deputy 
Commissioner was placed in charge of all licensing and examination 
functions. Another was given responsibility for all complaints and 
legal work. The First Deputy was put in charge of Department adminis- 



2 



tration and actuarial work. Professionally trained individuals were 
recruited for all three of these Senior Deputy positions. 

B. Financial Surveillance Unit 

The work of the Insurance Department in monitoring the solvency 
of insurers has always been conducted "in the field" under loose super- 
vision. The Department's record in detecting incipient financial im- 
pairments under this approach has been poor. A selected group of the 
top examiners will now be assigned to full time solvency work from 
inside the office. 

C. State Rating Bureau 

Our most important task in the eyes of the public is the regu- 
lation of casualty insurance rates. The Division's rate review capa- 
bility was greatly enhanced by the formation of the State Rating Bureau 
by legislation this year. Our new rating bureau will be staffed with 
CPAs, lawyers, and actuaries at competitive salary levels. 

D. Fraudulent Claims Board 

Due to the success of the bodily injury no-fault laws, the 
workload of the FCB investigators has fallen sharply. We reduced the 
staff accordingly from fifty-four to four employees. 

E. Budget 

The Insurance Department budget authorizes 325 positions of which 
309 were filled early this year. By termination or attrition, the total 
number now filled has fallen to 244. Both our 1976 and our 1977 budget 
requests were held within the target of 90% of 1975 expenditures. With 
the aid of new legislation on fees and assessments, we have reduced our 
net state cost from $1 million in 1975 to zero on net revenues for all 
future years. 

II- Rate Decisions 

Two important precedents were established in rate regulation 
during 1975: 

A. Blue Cross Non-Group Subsidies 

Blue Cross and Blue Shield rates have always been made separately 
for two major subsets of the subscriber population: group members 
(whose rates are unregulated) and non-group subscribers (whose rates 
are closely regulated) . Within the latter category, though, are two 
easily distinguishable populations. First, there are those individuals 
who, by virtue of self-employment or similar work conditions, were never 
members of a group plan. The health experience in this category is 
generally good. Second, there are individuals who have left group plans 



3 



and converted to non-group policies. The health experience here, 
strongly influenced by the age, health or other characteristics that 
caused the individual to exit the group plan, is substantially worse. 
A 1975 rate decision ordered that above-normal costs of group-conversion 
subscribers be charged, from now on, back to the group rates rather than 
the non-group rates. This represents an explicit recognition of the 
responsibility of group plans (and hence employers) toward those who 
will naturally leave those plans over time. 

B. Consideration of Investment Income 

Casualty insurance rates have always been made with an arbitrary 
allowance for profits expressed as a percentage of premium inflow. The 
traditional profit allowance in all fifty states for most casualty lines 
has been 5%; compulsory bodily injury coverage in Massachusetts has been 
assigned an underwriting profit allowance of 1%. This approach is com- 
pletely unsupportable by any ratemaking logic. In a May 1975 rate de- 
cision on worker's compensation, a new technique was introduced to 
derive the appropriate profit margin on the basis of a fair and reason- 
able overall rate of return on capital. Investment income (computed for 
a theoretical risk-free securities portfolio) was thereby made a part of 
of the ratemaking process for the first time. The technique received 
its first practical application in the fixing of automobile bodily 
injury rates. In order to produce an overall rate of return on capital 
of 11.5% (equivalent to the return in unregulated U.S. industry) after 
consideration of investment income, it was determined that the fair 
underwriting profit margin would be negative four percent for that line. 

III. Regulations 

Three significant regulations were promulgated by the Department 
during 1975: 

A. Equal Employment Opportunity 

In order to enhance the status of women and minority group 
members with respect to insurance hiring and promotions, the Department 
issued a regulation mandating an end to certain discriminatory personnel 
practices and instituting new practices which would favor affirmative 
action. The emphasis of the regulation is on upward minority movement 
at the lower and middle portions of the job pyramid. In response to a 
lawsuit on jurisdictional grounds filed by insurers, the Superior Court 
has issued a temporary restraining order against enforcement of the 
regulations. 

B. Extension of the FAIR Plan 

The FAIR Plan was established in 1968 as a compulsory pool of 
insurance carriers to provide basic fire insurance for those unable to 
purchase coverage in the normal markets. This year's extension of the 
plan added crime and liability coverages to the plan's offerings and 



4 



also allowed FAIR Plan customers to enjoy the benefits of package dis- 
counts available through the purchase of single policy for all homeowner's 
risks . 

C. Audits by CPA Firms 

All corporations subject to S.E.C. rules must have annual audits 
by professional firms of certified public accountants. The S.E.C. can 
accordingly perform its oversight function by exception only and concen- 
trate its efforts where it sees potential problems. Insurance companies 
are largely exempt from S.E.C. jurisdiction. Many do not use CPA's 
and the Department's triennial audit is of questionable oversight use- 
fulness. This month or early in January, Massachusetts will become the 
first of the fifty states to require annual certified CPA audits of all 
carriers doing business in the state. The Department will then be able 
to transfer its emphasis to solvency testing, market conduct evaluation 
and other tasks which CPA's are not expected to perform. 

IV. Legislation 

The General Court passed major legislation this year creating a 
Joint Underwriting Association in the medical malpractice line and re- 
forming the automobile property damage insurance laws. In both cases, we 
are continuing to work on both areas through joint special study 
commissions. 



Laws, Regulations 

& Decisions 



LAWS 



In 1975 the General Court passed, and the Governor approved, the 
following acts of legislation, which have a direct effect on the insur- 
ance business in Massachusetts. The number identifying each act is the 
chapter number assigned to it during the 1975 session of the General 
Court . 

Chap. Ill, further regulating the rights of certain persons to 
give discharges and other releases relative to insurance policies. 

Chap. 127, including services performed by registered dentists 
within certain coverage under accident and sickness insurance policies 
and certain contracts. 

Chap. 183, increasing the membership of the Insurance Advisory 
Committee of certain cities and towns, counties and districts. 

Chap. 196, extending the coverage of accident and health insurance 
to certain adopted children. 

Chap. 240, providing that group insurance coverages provided for 
public employees and retired public employees may be treated as separable 
by such employees. 

Chap. 241, further regulating the method of payment of the 



6 

premiums for certain group insurance coverage of certain employees of 
towns . 

Chap. 242, authorizing mergers of members of insurance holding com- 
pany systems into their domestic insurance company subsidiaries. 

Chap. 302, regulating certain reimbursements under insurance 
policies for services by podiatrists. 

Chap. 330, making a corrective change in the law further regula- 
ting the payment of premiums for insurance coverage of employees of the 
Commonwealth . 

Chap. 341, relative to the Massachusetts Insurers Insolvency Fund. 
Chap. 362, relative to medical malpractice. 

Chap. 455, requiring insurance companies to give certain notices 
of decisions to disclaim liability in workmen's compensation cases. 

Chap. 50 3, providing for the establishment of an unpaid employee 
advisory committee to the Group Insurance Commission. 

Chap. 542, further clarifying the prohibition against including 
provisions in insurance contracts covering residents of the Commonwealth 
which preclude payments of benefits for services rendered by soldiers' 
homes . 

Chap. 570, making a corrective change in the law establishing the 
Massachusetts Insurers Insolvency Fund. 

Chap. 595, prohibiting the refusal of insurance companies to issue 
certain policies to blind and deaf persons as individuals. 

Chap. 636, providing that local governmental units may pay one 
half the cost of premiums and the full amount of additional rates for 
group health insurance for the surviving spouses and children of police 
officers who were killed or who died from injuries received in the per- 
formance of duty. 

Chap. 693, further regulating the issuance of life insurance for 
certain mentally retarded persons. 

Chap. 707, further regulating the law relating to compulsory 
property protection insurance for all registered motor vehicles. 

Chap. 728, creating a State Rating Bureau to assist in the fixing 
and establishing of reasonable, just and nondiscriminatory premium 
charges for all lines of motor vehicle insurance. 

Chap. 750, amending certain motor vehicle insurance laws. 

Chap. 759, further regulating certain agreements between certain 
insurers and their agents. 

Chap. 792, authorizing political subdivisions to terminate accep- 
tance of the law providing life and health insurance for retired teachers. 

Chap. 806, authorizing group dental insurance coverage for persons 
in the service of counties, cities, towns and districts, and their 
dependents . 

Chap. 826, allowing the Commissioner of Insurance to hold hearings 
on fire insurance ratings upon request from cities or towns. 

Chap. 892, permitting certain payments of benefits by dental ser- 
vice corporations in connection with the services of non-participating 
dentists in the Commonwealth. 



7 



REGULATIONS 

To complement the laws governing insurance, the Massachusetts 
Division of Insurance used its statutory authority to issue rules and 
regulations. The rules and regulations adopted in 1975 are shown below, 
in their order of adoption. 

Memorandum of Order relative to the establishment of a statistical 

plan . 

Regulation 2-75, regarding equal employment opportunity in the 
insurance industry. 

Regulation 3-75, regarding the implementation of Regulation 2-74, 
relating to minimum standards of full and fair disclosure for the form 
and contents of accident and sickness insurance sold in the Commonwealth 
of Massachusetts. 



DECISIONS 

Statutes also give the Insurance Commissioner the power to hold 
hearings to determine the condition of the insurance marketplace, and, in 
some instances, to set rates. These findings were issued after due 
notice and hearing: 

Opinion, Findings and Decision on Blue Cross and Blue Shield non- 
group rates and on rates and riders for mental illness and alcoholism 
treatment . 

Opinions, Findings and Decision on 1975 workmen's compensation 

rates. 

Opinion, Findings and Decision on a proposed extension of the FAIR 

Plan. 

Findings and Order on a filing by Blue Shield of Massachusetts, 
Inc. for an increase in rates for Plan J subscribers; and for an increase 
in lifetime maximum, non-group major medical benefits. 

Opinion, Findings and Order on 1976 automobile bodily injury 
coverage rates. 

Opinion, Findings and Decision on a filing by Blue Cross of Massa- 
chusetts, Inc. of riders for non-participating hospitals. 

Opinion, Findings and Decision on classification of risks and 
premium charges for medical malpractice insurance; and addendum to that 
Decision . 

Opinion, Findings and Decision on 1976 automobile property damage 
coverage rates. 

The Division also issued decisions or agreed to consent orders in 
the following cases of alleged misconduct by agents, brokers, companies 
and other miscellaneous writers. 



Re: Joseph F. Ansaldi . 



8 



Re: George A. Russell. 

Re: Nicholas K. Shaheen. 

Re: William F. Kane. 

Re: Herbert E. Lee. 

Re: Richard D. Maxwell. 

Re: Vernon J. Paul, Sr. 

Re: Leon Walker, Jr. 

Re: Joseph C. Dolan. 

Re: John E. Wiley. 

Re: Ferdinand C. Macedo, Jr. 

Re: Richard B. Robinson and Sylvia B. Robinson. 

Re: Bernard T. Golden and Bernard T. Golden Insurance Agency, Inc 



Companies 



FINANCIAL EXAMINATIONS 



Each year, as required by law, the Division of Insurance routinely 
examines approximately one third of all Massachusetts-based insurance 
companies, as well as one third of all retirement systems for Massachu- 
setts public employees. 

Companies : 

Attleboro Mutual Fire Ins. Co. 

Boston Mutual Life Ins. Co. 

Dorchester Mutual Fire Ins. Co. 

Fitchburg Mutual Fire Ins. Co. 

Groveland Mutual Ins. Co. 

Liberty Life Assurance Co. of Boston 

Liberty Mutual Fire Ins. Co. 

Liberty Mutual Ins. Co. 

Loyal Protective Life Ins. Co. 

Mass Casualty Ins. Co. 

Mass Mutual Life Ins. Co. 

Mass Title Ins. Co. 



10 



New England Mutual Life Ins. Co. 
New England Reinsurance Corp. 

Retirement systems : 



Amesbury 


Milford 


Boston 


Milton 


Bristol 


Natick 


Danvers 


Needham 


Fairhaven 


New Bedford 


Hamden 


Newburyport 


Haverhill 


Norwood 


Hull 


Revere 


Lawrence 


Saugus 


Lowell 


State Employees 


Marlborough 


Stoneham 


Melrose 


Worcester County 



CHANGES 



On December 31, 1974, the number of companies admitted to write 
insurance in Massachusetts stood at 684. These companies were admitted 
in 1975 to do business in Massachusetts; their state of incorporation is 
shown in parentheses after the company name: 

American Variable Annuity Life Assurance Co. (Delaware) 
Commercial Union Reinsurance Co. (Massachusetts) 
The National Property Owners Ins. Co. (Tennessee) 
Union Indemnity Ins. Co. of New York (New York) 

These companies withdrew from writing insurance in Massachusetts; 
their state of incorporation is shown in parentheses after the company 
name : 

Casualty Indemnity Exchange (Missouri) 
Southwest Title Ins. Co. (Texas) 
Trinity Unversal Ins. Co. (Texas) 

These companies were renamed; the state of incorporation is shown 
in parentheses for both the old and the new names: 

American Republic Assurance Co. (Iowa) is now Provident National 
Assurance Co. (Iowa). 

Accident and Casualty Ins. Co. of Winterthur, Switzerland (New 
York) is now Winterthur Swiss Ins. Co. (New York). 

Holyoke Mutual Fire Ins. Co. in Salem (Massachusetts) is now 
Holyoke Mutual Ins. Co. in Salem (Massachusetts). 

Michigan Mutual Liability Co. (Michigan) is now Michigan Mutual 
Ins. Co. (Michigan). 



11 



Resolute Ins. Co. (Rhode Island) is now American Reserve Ins. Co. 
(Rhode Island) . 

Resolute Life Ins. Co. (Rhode Island) is now American Reserve Life 

Ins. Co. (Rhode Island) . 

Seaboard Fire and Marine Ins. Co. (New York) is now Drake Ins. 
Co. (New York) . 



LICENSE ACTIONS 



The Division of Insurance revoked the license of the American 
Professional Life Ins. Co. (Connecticut), effective June 16, 1975. 

Associated Merchants Mutual Ins. Co. (Massachusetts) was placed 
in permanent receivership, effective January 22, 1975. 

Millers' Mutual Ins. Assoc. of Illinois (Illinois) ceased to be a 
licensed direct writer. 

The Division of Insurance revoked the license of Seaboard Life 
Ins. Co. of America (Florida) , effective October 31, 1975. 

RECEIVERSHIPS 



Associated Merchants Mutual Insurance Company — On December 4, 
1974, upon petition from the Massachusetts Insurance Department, the 
Supreme Judicial Court issued an Interlocutory Decree, appointing the 
Commissioner of Insurance as temporary receiver for the Associated Mer- 
chants Mutual Insurance Company. 

On February 28, 1975, James M. Stone was appointed Commissioner of 
Insurance. In accordance with the provisions of Section 179 of Chapter 
175, he directed one of his deputies, Joseph F. Ciccio, to apply for 
appointment as receiver of the insurance company. On April 15, 1975, the 
Supreme Judicial Court approved this application. 

The Associated Merchants Mutual Insurance Company was subject to 
and came within the purview of the Massachusetts Insolvency Fund Act, 
Chapter 175D, which was established for the protection of policyholders. 
The Fund was notified of the receivership and assumed and proceeded with 
the adjustment and disposition of claims by policyholders. 

The receiver reported the following statement of cash assets, 
income and disbursements: 



12 



Balance (Jan. 1, 1975) $ 0.00 

Income 17,622.52 
Disbursements 12,647.21 



Balance (Dec. 31, 1975) $ 4,975.31 

Suffolk Insurance Company- -On November 25, 1964, upon petition 
from the Massachusetts Insurance Department, the Supreme Judicial Court 
issued an Interlocutory Decree, appointing the Commissioner of Insurance 
as receiver for the Suffolk Insurance Company. On December 17, 1964, the 
court issued a decree making that appointment permanent; in January, 1965, 
Alexander E. Finger was appointed counsel for the receiver. 

On May 21, 1975, assets as of February 28, 1975, were reported as 
$223,719.82. Pursuant to Chapter 175, Section 179, Joseph F. Ciccio, 
Deputy Commissioner of Insurance and General Counsel was appointed 
receiver. 

On November 12, 1975, the court allowed the appointment of Foley, 
Hoag and Eliot, and Sheldon Ganz as special counsel in addition to 
Alexander E. Finger. 

The receiver reported the following statement of assets, income 
and disbursements: 

Balance (Jan. 1, 1975) $217,967.88 
Income 11,739.24 
Disbursements 7,833.00 



Balance (Dec. 31, 1975) $221,874.12 

Summit Insurance Company of New York, Inc . — In February, 1975, the 
Summit Insurance Company of New York, Inc. , (Summit) was placed under 
supervision of the New York Department of Insurance pursuant to the Uni- 
form Insurers Insolvency Act. Shortly thereafter, the acting Insurance 
Commissioner of the Commonwealth of Massachusetts petitioned the Supreme 
Judicial Court of Massachusetts, for appointment as temporary 
ancillary receiver in Massachusetts of the affairs of the company. The 
order was granted on February 20, 1975, appointing Milton G. McDonald, 
Acting Commissioner of Insurance of the Commonwealth of Massachusetts, as 
temporary ancillary receiver. On May 28, 1975, Summit was declared 
insolvent by a court of competent jurisdiction in New York and placed in 
receivership for liquidation; a parallel order was entered in the Supreme 
Judicial Court at the same time. 



13 



On July 23, 1975, Keith R. Rodney was appointed permanent ancil- 
lary receiver in Massachusetts for Summit. Shortly thereafter Edmund E. 
Fleming was appointed counsel to the ancillary receiver. The balance of 
1975 was spent organizing the ancillary receivership, identifying 
claimants, arranging substitution of automobile insurance coverage, and 
identifying and attempting to marshall the assets of Summit in the Common- 
wealth. 

Rockland Mutual Insurance Company — Commissioner James M. Stone was 
appointed successor to the previous receiver in March, 1975, and at that 
time Edward T. Dangel III was appointed counsel to the receiver. The 
property, records and effects of the company are held in the receiver's 
custody and control at 112 Water Street, Boston, Massachusetts, 02109. 



LIFE VALUATIONS 



Each year, the Division of Insurance assigns a value to the 
reserves of Massachusetts-based life insurance companies. In 1975, the 
fee for this valuation amounted to $575,112.82. The fee is set by this 
formula: for each $1000 of life insurance in force on December 31, a 
fee of three and a half mills is charged; for each annuity contract or 
supplementary contract with life contingencies, a fee of four cents is 
charged. 



i 



Annual Report, 1976 
Division of Insurance 

State Library of MasSachusatfa 
State House, Boston 



Sfafe Library c ( " \\\ 
State Ho_, _.jion 



This report was produced pursuant to 
Chapter 175, Section 17 of The Massachusetts General Laws 



Michael S. Dukakis 
Governor of Massachusetts 

James M. Stone 
Commissioner of Insurance 



Massachusetts 
Division of Insurance 



Contents 



Progress Report 1 

Laws, Regulations & Decisions 6 

Laws 6 

Regulations 7 

Decisions 8 

Companies 9 

Financial Examinations 9 

Changes 10 

Cease and Desist Order 11 

Receiverships 11 

Life Valuations 13 



Progress Report 



This report summarizes the principal efforts of the Division of 
Insurance during 1976. 

I. Changes in the Operation of the Department 

This year brought nearly to completion the major reorganizational 
effort begun in 1975. The character of the Department has now been 
sharply altered. Among the changes are the following: 



A. Reporting Structure . Last 
better use of our Deputy Commissioner 
now report to the Commissioner where, 
dozen individuals reporting directly, 
next level of management, the Section 



year's emphasis was on making 
positions. Four senior Deputies 
in the past, there were at least a 

This year's work focused on the 
Supervisors . 



Under First Deputy Commissioner Giffin are the Hearings Section, 
the Administrative Section and the Research and Education Section. Under 
Deputy Commissioner Rodney are the Field Audit Section, the Retirement 
System Examination Section, the Financial Surveillance Section, the 
Agents and Brokers Section, and the Special Investigation Section. Under 
Deputy Commissioner Hillman are the Legal Section, the Consumer Services 



2 



(Complaints) Section and the Board of Appeals. Each Supervisor now has 
primary operational, promotional and disciplinary responsibilities for 
the employees in the section. Only the new State Rating Bureau under 
Director James Hunt has not yet been organized by section. The State 
Rating Bureau is responsible for rate regulation and policy forms approval. 

B. Staffing Changes . The number of employees holding profes- 
sional designations as attorneys, C.P.A.'s, actuaries, Ph.D's or MBA's 
has risen from less than half a dozen in 1975 to approximately 30. The 
total staff complement has been held, however, at 244 as compared with 
304 in January of 1975. 

II. Auto Insurance Law Reforms 

Many changes in automobile insurance laws were brought about 
during the 1976 legislative session. Among the most visible were: 

A. Merit Rating 

Insurance rates in Massachusetts have, for many years now, taken 
no account at all of the insured's driving record. With cancellation on 
the basis of record also forbidden, Massachusetts was the only one of 
the fifty states to provide no financial incentive for good driving and 
responsible claims behavior. Under the new law, at-fault accidents and 
moving violation convictions will result in surcharges against drivers' 
premiums. The table of surcharges specifies twelve different possible 
surcharge amounts depending on the type of incident and the driver's 
prior surcharge record. The lowest surcharge, applying for example to a 
first offense speeding conviction, is $25. The highest surcharge, for a 
third drunken driving conviction, is $675. Accident surcharges range 
from $50 to $300. All of the surcharge money collected is returned to 
drivers with clean records as credits on their insurance bills. 

B. Competitive Rates 

Until this year, all automobile insurers in Massachusetts used the 
same schedule of rates. That schedule was determined by the Commissioner 
of Insurance. The legislature has now enacted a competitive rating law, 
although it rejected our proposal to phase in the new system slowly over 
several years. Each company will file for any change in rates it wishes 
to implement, and the Commissioner retains four types of stand-by 
authority to prevent abuses. The Commissioner can disallow any rate be- 
fore it goes into effect; he can retroactively roll back any current rate 
found to be excessive; he can order a return to the old fixed rate system 
if competition is shown not to be functioning; or he can initiate crimi- 
nal and civil court action if he finds violations of strict, anti-trust 
laws . 



3 



C . Changes in Claims Procedures 

The existing statutes permitted many claimants to collect both 
theft and collision payments far in excess of the true worth of their 
vehicles. The statute did not permit claims or lawsuits for damages not 
covered by insurance. The new law limits claims for partial losses to 
the actual cost of repair and limits claims for total losses to the 
actual cash value of the vehicle. At the same time, it reintroduces the 
right to collect for uninsured property damage. The bodily injury no- 
fault system, which reduced bodily injury tort claims by over 70% since 
1971, was not altered by the new law. 

III. Rate Decisions and Regulations 

Numerous administrative decisions were issued or confirmed in 1976. 
Among them were : 

A . Consideration of Investment Income in Rate Regulation 

Last year's automobile rate decision introduced a new approach to 
considering investment income in the determination of reasonable under- 
writing profit margins. Insurance companies protested the new method and 
its resulting reduction in allowable margins by appealing the rate 
decision to the Supreme Judicial Court. In August, the Court unanimously 
upheld the decision. The use of an investment income analysis will now 
be required in other regulated rate filings made to the Department. 

B . Requirement of Audits by CPA Firms 

Early this year, the Department issued a regulation requiring each 
insurance company doing business in Massachusetts to submit to an annual 
audit by an independent firm of certified public accountants. Although 
this was the first regulation in the country to apply such a requirement 
to foreign and domestic insurers, no company has refused to comply with 
the regulation. No court action challenging the regulation has been 
brought and none is presently anticipated. As a result of the new rules, 
the Department will increasingly shift the bulk of its examination 
resources to situations where potential problems are indicated and will 
deemphasize routine verification audits. 

C . Pension Fund Investment Policy 

In January, the Department issued a letter of opinion to all 
Contributory Retirement Systems for Public Employees. The opinion 
limited permissible investments of public retirement trust funds in 
employer unit securities. State, county and municipal retirement funds 
were forbidden to invest more than 10% of their assets in securities 
issued by the employer unit for which the fund was constituted. It was 
further ordered that the price to be paid for any employer unit security 
must be no less favorable than that paid by an independent party for a 
substantial portion of the same issue. 



4 



D . Automobile Rate Filing Forms 

Under the new competitive rating law, the Department may be called 
on to review dozens of separate automobile rate filings in a single year. 
This could not be done with any reasonable degree of consistency if com- 
panies presented different types of justifications with widely differing 
formats. The problem has been so serious in other jurisdictions that 
stand-by powers to guard against competitive failures have often existed 
in name only. In October, Massachusetts became the first state to 
specify by regulation a standard form for all automobile rate filings. 

E. Procedures for the Conduct of Public Hearings 

A long-standing history of procedural informality at insurance 
rate hearings had rendered extremely difficult any consumer intervention 
in the rate regulation process. Because complex actuarial assertions 
require time to digest and substantial preparation to refute, the parti- 
cipation rights of the Consumers' Council, the Consumer Protection Sec- 
tion of the Attorney General's Office and other consumer organizations 
had seldom been effectively exercised. This year the Department, in con- 
sultation with the various participants, promulgated formal regulations 
for the conduct of public hearings. The regulations require written 
advisory filings by all parties in time for meaningful pre-hearing dis- 
covery, and they codify the rights of due process throughout the hearing 
procedure. 

IV. Consumer Information Services 

One of the greatest public demands upon an insurance regulator is 
the demand for help in understanding the insurance product. Consumers 
seldom feel that they know exactly what protections they are buying or 
how to evaluate the fairness of the price. Two major steps were taken by 
the Department in 1976 to aid consumers of automobile insurance. Similar 
approaches will be tried in other insurance lines next year: 

A. Easy-to-Read Policies 

The standard Massachusetts automobile policy form, which had 
evolved over fifty years of patchwork, was a classic in obscure jargon. 
The first sentence was 162 words long. Consumers, agents and company 
people found much of the verbiage convoluted and confusing. In May, the 
Department ordered that a new readable form be developed for use in 1977. 
By November, an Easy-to-Read form was agreed upon by all parties. The 
new form has 40% fewer words than the old policy; the type size and 
margins are sharply increased; and virtually all of the arcane words and 
phrases have been removed. A few companies in a few states had already 
introduced policies clearer than the traditional forms. Massachusetts is 
now the first state to provide a readable form for every auto policy- 
holder. 



5 



B. Buyers' Guides 

The automobile insurance reform law of 1976 contained a provision 
requiring all companies writing auto policies to distribute to all policy 
holders copies of a Buyers' Guide prepared by the Commissioner. The 
Guide plainly explains the new laws, evaluates choices of coverage and 
deductibles, and recommends ways to shop for the best carrier under the 
new competitive rating law. The Guide is presently in the process of 
distribution to over two million policyholders. 



Laws, Regulations 

& Decisions 



LAWS 



In 1976 the General Court passed, and the Governor approved, the 
following acts of legislation, which have a direct effect on the insur- 
ance business in Massachusetts. The number identifying each act is the 
chapter number assigned to it during the 1976 session of the General 
Court . 

Chap. 1, further regulating the law relating to compulsory 
property protection insurance for all registered motor vehicles. 

Chap. 141, relative to the licensing of insurance agents or 
brokers . 

Chap. 176, providing for payments into the general insurance 
Guaranty Fund for claims relating to unification of mortality. 

Chap. 20 3, making certain corrective changes in the laws relating 
to non-profit hospital service corporations and medical service corpora- 
tions . 

Chap. 226, relative to motor vehicle insurance. 

Chap. 307, authorizing non-profit hospital service corporations to 
furnish services relating to the providing of hospital or other health 
services and to make loans and other agreements in connection with 



7 



developing health maintenance organizations, medical foundations and 
othe.r alternative means and organizations for the delivery of health care. 
SEE ALSO Chap. 308 of the same title. 

Chap. 355, relative to the real property investments of domestic 
life insurance companies. 

Chap. 391, increasing the amount for which policies and annuities 
may be written by savings and insurance banks. 

Chap. 401, authorizing corporations to be insurance advisers. 

Chap. 454, further regulating the organization and operation of 
health maintenance organizations. 

Chap. 471, requiring companies providing health and accident 
insurance cancellable at age sixty-five to issue certain notices. 

Chap. 474, increasing the amount of compensation for incapacity 
under the law regulating workmen's compensation. 

Chap. 524, increasing the ceiling for the voluntary purchase of 
optional group life and group accidental death and dismemberment insur- 
ance by state employees with no premium contribution by the Commonwealth. 

Chap. 525, further regulating the application of surcharges in 
merit rating plans for motor vehicle insurance. 



REGULATIONS 



To complement the laws governinq insurance, the Massachusetts 
Division of Insurance used its statutory authority to issue rules and 
regulations. The rules and regulations adopted in 1976 are shown below, 
in their order of adoption. 

Regulation 1-76, regarding audits of insurers by independent 
Certified Public Accountants. 

Regulation 4-76, regarding procedures for the conduct of hearings 
of motor vehicle insurance rates. 

Regulation 2-76, regarding procedures for the adoption of regula- 
tion . 

Regulation 3-76, regarding procedures for requests of advisory 
opinions . 

Emergency Regulation 5-76, regarding procedures concerning rate 
filings and the conduct of hearings for motor vehicle insurance pursuant 
to Section 7 of Chapter 175E of the Massachusetts General Laws. 

Regulation 6-76, regarding prescription of forms for rate filings 
pursuant to Section 7 of Chapter 175E of the Massachusetts General Laws. 

Emergency Regulation 7-76, regarding Massachusetts automobile 
insurance table of short rate values. 

Emergency Regulation 8-76, regarding procedures for the conduct of 
hearings for medical malpractice insurance rates pursuant to Section 5A 
of Chapter 175A of the Massachusetts General Laws. 

Emergency Regulation 9-76, regarding the Standard Merit Rating Plan. 

Regulation 5-76, regarding procedures concerning rate filings and 
the conduct of hearings for motor vehicle insurance pursuant to Section 7 
of Chapter 175E of the Massachusetts General Laws. 



8 



Regulation 7-76, regarding Massachusetts automobile insurance 
table of short rate values. 



DECISIONS 



Statutes also give the insurance commissioner the power to hold 
hearings to determine the condition of the insurance marketplace, and, i 
some instances, to set rates. These findings were issued after due 
notice and hearing: 

Correction Notice of the Opinions, Findings and Decision of 1976 
automobile property damage coverage rates rendered December, 1975. 

Opinion, Finding and Decision on a filing by Blue Cross of Mass., 
Inc. for an increase in rates for non-group subscribers who elect to be 
insured under the Harvard Community Health Plan. 

Opinion of the Commissioner of Insurance concerning purchases by 
retirement systems of employer unit securities. 

Opinion, Finding and Decision on a filing by Blue Cross of Mass., 
Inc. and Blue Shield of Mass., Inc. for increases in rates for Medicare 
Extension contracts (Medex) . 

Opinions, Findings and Decision on proposed territories for 1977. 



The Division also issued decisions or agreed to consent orders in 
the following cases of alleged misconduct by agents, brokers, companies 
and other miscellaneous writers. 

Re: Nathan S. Michael (Villa Insurance Agency). 

Re: Richard W. Alix. 

Re: Charles E. Farrington (Oakwood Insurance Agency). 

Re: Reginald Robert Johnson. 

Re: David R. Hughes and Inman Square Insurance Agency, Inc. 

Re: Gerald W. Savoie and All Type Insurance Agency, Inc. 

Re: Ronald A. Sprague . 

Re: Ronald M. Freeman and Alan S. Freeman. 

Re: Francis P. Donahue. 



Companies 



FINANCIAL EXAMINATIONS 

Each year, as required by law, the Division of Insurance routinely 
examines approximately one third of all Massachusetts-based insurance 
companies, as well as one third of all retirement systems for Massachu- 
setts public employees. 

Companies : 

A M Life Ins. Co. 

American Mutual Ins. Co. of Boston 

American Mutual Liability Ins. Co. 

American Policyholders Ins. Co. 

Arkwright-Boston Manufacturers Mutual Ins. 

Arkwright-Boston Ins. Co. 

Middlesex Ins. Co. 

New England Title Ins. Co. 

Newburyport Mutual Fire Ins. Co. 

Norfolk and Dedham Mutual Fire Ins. Co. 

Patriot General Ins. Co. 

Patriot General Life Ins. Co. 



in 



Paul Revere Life Ins. Co. 

Paul Revere Variable Annuity Ins. Co. 

State Mutual Life Assurance Co. 

United States Mutual Liability Ins. Co. 

West Newbury Mutual Fire Ins. Co. 



Retirement system s : 

Adams 

Andover 

Athol 

Attleboro 

Belmont 

Beverly 

Braintree 

Brockton 

Cambridge 

Chicopee 

Clinton 

Dedham 

Easthampton 

Fall River 

Fitchburg 

Franklin 

Gardner 

Gloucester 



Holyoke 
Lexington 
Lynn 
Medf ord 

North Attleborough 

Peabody 

Quincy 

Reading 

Swamp scot t 

Taunton 

Waltham 

Watertown 

Winchester 

Winthrop 

Woburn 

Mass Turnpike Authority 
MHF Agency 
Middlesex County 
Wakefield 



CHANGES 



These companies were admitted in 1976 to do business in Massa- 
chusetts; their state of incorporation is shown in parentheses after the 
company name: 

Aetna Variable Annuity Life Ins. Co. (Connecticut) 

Cologne Life Reinsurance Co. (Connecticut) 

Durham Life Ins. Co. (North Carolina) 

Great American Ins. Co. (Ohio) 

Kentucky Central Life Ins. Co. (Kentucky) 

Leatherby Ins. Co. (California) 

PMI Mortgage Ins. Co. (Arizona) 

Prudential Property and Casualty Ins. Co. (New Jersey) 
Universal Underwriters Life Ins. Co. (Missouri) 



These companies withdrew from writing insurance in Massachusetts; 
their state of incorporation is shown in parentheses after the company 
name : 



American Liberty Ins. Co. (Alabama) 
Cosmopolitan Mutual Ins. Co. (New York) 
General United Life Ins. Co. (Iowa) 



1 1 



Interboro Mutual Indemnity Ins. Co. (New York) 
Wolverine Ins. Co. (Michigan) 

These companies were renamed; the state of incorporation is shown 
in parentheses for both the old and the new names: 

American International Ins. Co. (New York) is now A.I.U. Ins. Co. 
(New York) . 

General Fire and Casualty Co. (New York) is now Allianz Ins. Co. 
(New York) . 

The Manhattan Fire and Marine Ins. Co. (New York) is now Puritan 
Ins. Co. (New York) . 

Mowhawk Ins. Co. (New York) is now National American Ins. Co. of 
New York (New York) . 

Motor Club Fire and Casualty Co. (New Jersey) is now Garden State 
Fire and Casualty Co. (New Jersey) . 

CEASE AND DESIST ORDER 

The Massachusetts Division of Insurance ordered United Founders 
Life Ins. Co., incorporated in Oklahoma, to cease and desist writing new 
business, effective May 3, 1976. 

For more extensive data on any insurance company that operates in 
Massachusetts, the reader should consult the proper volume of Best ' s 
Insurance Reports , or examine the company's financial statement on file 
with the Massachusetts Division of Insurance. 

RECEIVERSHIPS 

Associated Merchants Mutual Insurance Company — Joseph F. Ciccio, 
as receiver for the insurance company, continued to retain in his pos- 
session the assets of the insurance company. During this 
time, the Massachusetts Insurer's Insolvency Fund, pursuant to Chapter 
175D, continued with the adjustment and disposition of claims by policy- 
holders. Some of the claims were disputed claims pending in court. The 
Fund has not disposed of all known claims at the present time. 

The receiver reported the following statement of cash assets, 
income and disbursements: 



Balance (Jan. 1, 1976) 



$ 4,975.31 



Income 



8,942 .98 



Disbursements 



12,485.91 



Balance (Dec. 31, 1976) 



$ 1,432.38 



] 2 



Puritan Marine Insurance Underwriters Corp .--A complaint request- 
ing the Supreme Judicial Court to appoint the Commissioner of Insurance as 
a receiver over the assets of the brokerage firm was filed in the Supreme 
Judicial Court on June 3, 1976. On that date Deputy Commissioner of 
Insurance Keith R. Rodney was appointed temporary receiver. After 
notice to all the creditors of Puritan Marine, on September 8, 1976 the 
Court ordered a final decree enjoining Puritan Marine Insurance Under- 
writers Corporation from doing business, and appointing Deputy Commis- 
sioner Keith R. Rodney as permanent receiver. 

Michael S. Field, of 27 State Street, Boston, was appointed 
counsel to the receiver. Shortly thereafter, an interest-drawing check- 
ing account was opened in the name of the receiver at the United States 
Trust Company of Boston. An initial deposit of approximately $9,700.00 
was transferred to the account, which amount had previously been accu- 
mulated as a result of the efforts of Mr. Maurice H. Saval, acting as a 
concerned member of the insurance industry and at the request of the 
Division of Insurance. This sum represented monies owed the insurance 
agency. 

The property, records and affects of the agency remain, in part, 
at the offices of Maurice H. Saval, Saval Insurance Company, 22 
Batterymarch, Boston. Some records were transferred to the office of 
counsel for the receiver, who began marshalling the assets and determin- 
ing liabilities in compliance with the law, rules and regulations con- 
cerning the maintenance and operation of the affairs of the receiver- 
ship. 

Rockland Mutual Insurance Company— The property, records and 
effects of the company are held in the receiver's custody and control 
at 112 Water Street, Boston, Massachusetts, 02109. Claims, priority and 
general, in an amount in excess of $7 million have been submitted 
to the receiver. Through his counsel, Edward T. Dangel III, the 
receiver is litigating and collecting various sums alleged to be due the 
receiver. 

Suffolk Insurance Company- -Joseph F. Ciccio, as receiver, with the 
assistance of legal counsel continued disposing of claims of injured 
persons against policyholders of Suffolk Insurance Company. Various 
claims were negotiated and settled. On May 5, 1976 the Supreme Judicial 
Court allowed payment of these claims, totaling $4,895.50. In addition 
the court allowed payment of attorney fees in the amount of $2,188.56. 

The receiver reported the following statement of assets, income, 
and disbursements: 



13 



Balance (Jan. 1, 1976) 



$221,874. 12 



Income 



11,651. 56 



Disbursements 



10,843.74 



Balance (Dec. 31, 1976) 



$222,681.94 



Summit Insurance Company of New York, Inc . — The ancillary 
receivership continued as set up in 1975. The marshalling of assets 
located in the Commonwealth continued. The claims of insured and 
damaged parties, including those undertaken pursuant to law by the 
Massachusetts Insurer's Insolvency Fund, were overseen and, where appro- 
priate, processed. Suits were commenced to collect assets, and other 
law suits in progress were taken over. Cooperation and joint efforts 
were undertaken between the ancillary receivership and the domiciliary 
receivership and the domiciliary receivership in New York to the advan- 
tage of both receiverships. 

LIFE VALUATIONS 



reserves of Massachusetts-based life insurance companies. In 1976, the 
fee for valuations amounted to $697,548.79. The fee is set by this 
formula: for each $1000 of life insurance in force on December 31, a fee 
of four mills is charged; for each annuity contract or supplementary con- 
tract with life contingencies, a fe3 of four cents is charged. 



Each year, the Division of Insurance assigns a value to the 



Annual Report, 1977 
Division of Insurance 

I State Library of Massachusef 

State House, Boston 



State Library of Massachusetts 
State House, Boston 



This report was produced pursuant to 
Chapter 175, Section 17 of The Massachusetts General Laws 

Michael S. Dukakis 
Governor of Massachusetts 

James M. Stone 
Commissioner of Insurance 



Massachusetts 
Division of Insurance 



Contents 



Progress Report 1 

Laws, Regulations & Decisions 7 

Laws 7 

Regulations 8 

Decisions 9 

Companies 11 

Financial Examinations 11 

Market Conduct Examinations 12 

Changes 13 

Receiverships 15 

Life Valuations 16 



Progress Report 



Anyone who reads the newspapers in Massachusetts should be aware 
that automobile insurance premiums provided the dominant concerns of the 
Division in 1977. A short chronology of the automobile insurance situa- 
tion will serve to summarize much of the year's activities: 

— In November of 1976 , companies filed rates under the new competi 
tive pricing law. 

— In January of 1977 , the new premium rates took effect. By this 
time it had become apparent that a pronounced shift in premium burden 
was embodied in the competitive filings. While the overall statewide 
premium total was increased by less than it had been raised in either of 
the two prior years, the premiums for youthful and urban drivers were 
raised dramatically by some insurers. 

--In March , numerous complaints were registered concerning the 
operation of the Motor Vehicle Reinsurance Facility (Facility) . Com- 
panies and their agents were accused of assigning generally higher 
Facility rate levels in place of published company rates to many drivers 
without any form of notice. 



2 



— In April , all of the major insurers, with just one exception, 
rejected the Administration's proposal to voluntarily limit premium 
increases to 25% above the applicable rate for the previous year. The 
Administration filed legislation which would establish a mandatory cap 
and order corresponding rebates to policyholders. 

--In May , a Division examination of the Facility was concluded with 
the issuance of a report charging that companies were using arbitrary and 
unjustifiable criteria for selecting drivers to be denied coverage at 
standard rates. The Facility report also confirmed that lack of proper 
notification concerning policyholder placement was more the rule than the 
exception . 

--In June , a decision on the adequacy of competition was issued 
pursuant to the new rating law. It cited unavailability of pricing 
information in the marketplace, a lack of competitive vigor on the part 
of insurers, and an unreasonable pattern of Facility placements as 
reasons that the public could not rely on competition, as then operating, 
to regulate insurance prices. A temporary return to state-made rates was 
ordered. 

— In July , the legislature enacted a rebate bill. It ordered a 
25% cap on 1977 premium increases and a 10% additional discount for all 
drivers insured at Facility rates. Total customer rebates ordered by the 
law amounted to approximately $50 million. The emergency statute also 
changed the regulatory framework of the Facility. It prohibited the 
charging of a Facility rate in excess of standard, company rates to any 
policyholder without an objectively poor record of at-fault accidents or 
convictions . 

— In August , the Division issued a notice of hearing to set 1978 
rates. Special attention was called to the Division's doubts about the 
continued acceptability of age and sex classification in automobile 
insurance and the accuracy of traditional territorial rate differentials 
among policyholders. The State Rating Bureau staff began devoting itself 
to a full time research effort on automobile insurance pricing. 

— In October , the public hearing on 1978 rates began. Witnesses 
from Miami, Los Angeles and New York joined with Massachusetts consumer 
groups on the opening day in calling for an overhaul of the customary 
pricing techniques. The State Rating Bureau filed a lengthy research 
document in support of a proposed plan which would scrap much of the 
familiar age, sex and territory classification system in favor of a 
system placing primary emphasis on individual driving record. The hear- 
ing spanned twenty four days and took testimony from more than forty 
expert witnesses, including a variety of leading figures in actuarial 
science and statistics. 

Toward the end of the month, a new Plan of Operation for the Motor 
Vehicle Reinsurance Facility was issued. The Plan was drafted by the 
Division in accordance with the 1977 statutory changes. It created a 



3 



novel system of premium credits to encourage the voluntary writing of 
insurance in urban areas. 

--In December , the 1978 premium rates were established by the 
issuance of a two hundred and seventy page hearing decision. An overall 
12% reduction in premium levels was ordered, reflecting improved claim 
statistics since the institution of individual merit rating in late 1976. 
More important, the decision accepted the recommendations of the State 
Rating Bureau with respect to changes in relative pricing. Youth, mari- 
tal status and gender were dropped from the classification system 
altogether. Territorial differentials were attentuated by a flattening 
of traditionally proportional expense loadings and the introduction of a 
systematic tempering factor to reflect biases in the raw territorial 
data. Premiums for most urban drivers with clean records were reduced 
substantially. Reductions of more than 60% were granted to some urban 
and youthful drivers. The overall rate reduction, which totalled more 
than $100 million, kept increases in rural and suburban areas to moder- 
ate levels. 



The Division also attended to numerous less publicized projects in 
1977. Of great operational importance, but of little direct concern to 
those outside the Division, was the completion of the structural 
reorganization begun in 1975. A management chart of the Division would 
now show four Senior Deputies reporting to the Commissioner and 12 Sec- 
tion Supervisors, each reporting to one of the Senior Deputies. All 16 
of the Senior Deputies and Section Supervisors were hired or promoted to 
their current positions under this Administration. The remainder of 
this report is presented as the responsibilities within the Division are 
allocated . 

I. Research and Administration (First Deputy Commissioner Andrew 
F . Giffin) 

A. Budget and Personnel . The principal personnel goal of the 
Division continues to be an enhancement of professionalism. The number 
of employees holding designations as attorneys, C.P.A.'s, actuaries, 
Ph.D.'s or M.B.A.'s stood at 40 by the end of the year. Total staff com- 
plement now numbers 232, down 72 since January of 1975. The Division's 
budget request for fiscal 1978 was $3.9 million as compared with expen- 
ditures of $4.1 million in fiscal 1975, the last budget period beginning 
prior to this administration. 

B. Implementation Planning for New Legislation 

The Division's research staff devoted considerable time to the 
promotion and implementation of several significant new statutes. During 
1976, the Legislature passed a law establishing a licensing and super- 
vision procedure for Health Maintenance Organizations. The Division then 
produced a comprehensive set of regulations to meet the statutory man- 



4 



date. The rules are designed to encourage the development of Health 
Maintenance Organizations while maintaining a high degree of financial 
safety and quality control. The Division licensed the first three Health 
Maintenance Organizations during the fall of 1977. 

Based on a department initiative, a law was passed to grant domes- 
tically chartered life insurance companies tax reductions in exchange for 
their participation in a $100 million investment fund to sponsor job- 
creating economic activity within the Commonwealth. The Division will 
monitor the progress of the fund to see that its resources are used for 
the promotion of maximum domestic employment growth. 

Another 1977 statute, enacted after a protracted legislative 
battle, requires that all insurance policy forms sold to individuals in 
the Commonwealth after 1979 be written in plain readable English. This 
will extend to the life and health lines the progress made last year by 
the Division on the automobile insurance policy form. A group combining 
skills from several sections of the department is now at work drafting 
appropriate standards for the implementation of the law. 

II. Licensing and Examinations (Deputy Commissioner Keith R. 
Rodney) 

A. Staff Improvements . The examination force represents the 
largest personnel unit in the Division. It has traditionally been the 
least qualified to perform its statutory tasks. This year a rigorous 
training program for examiners was designed and initiated. Nearly ninety 
examiners participated in classroom educational sessions and were given 
written tests to measure their progress. At the same time, two new 
auditors with formal financial training were hired to help replace eleven 
examiners retiring or leaving the department for other reasons. 

B. Company Rehabilitation . In June of 1977, Division auditors 
identified from the required annual CP. A. reports that the Loyal Pro- 
tective Life Insurance Company was in danger of insolvency. A receiver- 
ship was granted the Division by the Supreme Judicial Court and the 
company's finances were dramatically reorganized. The company was sub- 
sequently sold, after a vote of its shareholders, to a larger concern and 
the receivership was terminated. No insolvency fund exists in Massachu- 
setts for the protection of life insurance policyholders in the event of 
a business failure. 

C. Investigations . Staff examiners conducted an intensive sur- 
vey of business practices among insurance agents with special emphasis on 
inner city areas and sales to elderly citizens. Over forty agencies have 
been accused of systematic overcharges or misrepresentations. The inves- 
tigations are continuing. 



5 



III. Legal and Consumer Services (Deputy Commissioner and Chief 
Counsel Donald Hillman) 

A. Regulations and Enforcement Actions . While the many auto- 
mobile insurance hearings during the year occupied the bulk of the legal 
section's time, additional progress was also made in codifying the Divi- 
sion's procedural practices. Regulations governing hearings other than 
for automobile insurance ratemaking were developed. 

Staff lawywers also devoted considerable time to the disciplinary 
hearings which resulted from the investigation work of the examination 
section. Seventeen licenses have been suspended or revoked, and action 
is pending in more than twenty additional cases. 

B. Direct Consumer Services . The Division's complaint staff 
handled a record 12,500 individual cases during the year involving prob- 
lems with companies or agents. The most impressive advance in this sec- 
tion's performance is embodied in a newly designed and computerized 
information system. The new recording techniques permit detailed 
analysis of consumer complaints by line of business and by licensee. 
This gives the Division a previously unavailable tool for identifying 
systemic problems and chronic violators. 

IV. State Rating Bureau (Director James H. Hunt) 

A. Propery Insurance Premium Rates . The most important contri- 
bution of the State Rating Bureau during 1977 was, of course, in the 
area of automobile insurance rates. The seven hundred page filing pre- 
pared by the Bureau's staff for the October hearing provided the neces- 
sary support for the overall rate adjustment and the classification 
changes. Precedents were also set, however, in another property insur- 
ance line. Early in the year, a hearing was held on homeowners rates for 
policyholders insured in the FAIR Plan, a compulsory pool of companies 
providing coverage for those individuals unable to secure it in the 
voluntary market. The member insurance companies had requested a 50% 
surcharge over normal market rates for all FAIR Plan insureds to help 
cover a deficit in the plan. The State Rating Bureau did not challenge 
the existence of a deficit but opposed the filing as contrary to the 
Congressional intent and public purpose in establishing the FAIR Plans. 
The proposed increase was rejected by the Division as unfairly discrimi- 
natory in that it would penalize a group defined exclusively by the 
common characteristic of rejection by a company underwriter. The 
decision concluded that policyholders are entitled to rates based on 
identifiable criteria and a reason, with possible appeal, for any cancel- 
lation or rejection which might result in a surcharge. Massachusetts 
FAIR Plan rates, accordingly, are now pegged to standard voluntary mar- 
ket rates scheduled according to objective property characteristics. 

B. Extension of the Consideration of Investment Income . The work 
of the Division in applying an overall rate of return concept to rate 
regulation continued in both theory and practice. An article of academic 



6 



quality was prepared showing the derivation of appropriate underwriting 
returns in each major property-casualty line from the Capital Asset 
Pricing Model of company investments. An industry filing for increased 
worker's compensation premiums was rejected for failure to employ an 
investment income approach. The denial was appealed by the companies to 
the Supreme Judicial Court and a judgment was entered in favor of the 
Division. A revised industry filing made later in the year employed an 
investment income measurement and sought an underwriting margin allowance 
of negative 4.6% in place of the traditional positive 2.5% margin. A 
similar concept was applied in the establishment of medical malpractice 
rates for the year. 



Laws, Regulations 

& Decisions 



LAWS 



In 1977 the General Court passed, and the Governor approved, the 
following acts of legislation, which have a direct effect on the insur- 
ance business in Massachusetts. The number identifying each act is the 
chapter number assigned to it during the 1977 session of the General 
Court . 

Chap. 221, further regulating the date for filing annual state- 
ments of insurance companies. 

Chap. 286, relative to investments of domestic life insurance com- 
panies. 

Chap. 340, clarifying the requirements of a corporate license for 
insurance agents and brokers. 

Chap. 341, authorizing nonprofit medical service corporations to 
provide health insurance to subscribers outside the Commonwealth. 

Chap. 353, changing the date by which automobile clubs must file 
statements of financial condition with the Commissioner of Insurance. 

Chap. 364, providing for certain changes in the rates charged for 
risks in the Motor Vehicle Reinsurance Facility. 

Chap. 365, relative to the rates charged for motor vehicle insur- 
ance . 



Chap. 437, providing that an insured's failure to seasonably 
notify an insurer of a claim shall not prevent insurance coverage unless 
the insurer has been prejudiced thereby. 

Chap. 474, extending the medical malpractice insurance joint 
underwriting association. 

Chap. 475, relative to the special commission on medical malprac- 
tice . 

Chap. 493, authorizing the writing of replacement value insurance 
on household furniture, furnishings and other personal property. 

Chap. 578, allowing certain insurance companies to act as an urban 
redevelopment corporation. 

Chap. 613, repealing the requirement that medical malpractice 
insurance be offered both on a claim-made and occurrence basis. 

Chap. 741, extending the coverage of group life insurance to 
dependents . 

Chap. 786, providing for the acceptance of arrest bond certificates 
guaranteed by automobile associations or travel clubs. 

Chap. 801, requiring insurance policies to be written in a form 
that can be easily understood. 

Chap. 804, further regulating the disbursement of insurance pro- 
ceeds . 

Chap. 816, establishing the Capital Resource Company and reforming 
the taxation of domestic insurance companies and savings and insurance 
banks, and providing for the reduction of unemployment through increased 
investments in Massachusetts businesses. 

Chap. 846, authorizing medical malpractice self-insurance funds. 

Chap. 900, providing that certain political subdivisions may be 
self-insurers for certain insurance purposes. 

Chap. 910, further regulating the cancellation, modification, 
revocation or expiration of contracts between insurers and independent 
insurance agents. 

Chap. 1000, relative to licensing fees for examination and reexami- 
nation of insurance agents and brokers. 

REGULATIONS 



To complement the laws governing insurance, the Massachusetts 

Division of Insurance used its statutory authority to issue rules and 

regulations. The rules and regulations adopted in 1977 are shown below, 
in their order of adoption. 

Emergency Regulation 1-77, regarding the prescription of forms for 
motor vehicle theft reports. 

Regulation 3-77, regarding the Standard Merit Rating Plan. 

Emergency Regulation 2-77, regarding reductions in premium charges 
for private passenger motor vehicles and certain commercial motor 
vehicles equipped with an anti-theft mechanism. 

Regulation 6-77, regarding reductions in premium charges for pri- 
vate passenger motor vehicles and certain commercial motor vehicles 
equipped with an anti-theft mechanism. 



9 



Emergency regulation 5-77, regarding procedures relating to advi- 
sory filings and the conduct of hearings concerning motor vehicle insur- 
ance rating and underwriting practices, and the fixing and establishing 
of motor vehicle insurance rates. 

Regulation 7-77, regarding the prescription of forms for motor 
vehicle theft reports. 

Regulation 4-77, regarding the regulation of health maintenance 
organizations (HMOs) . 

Amendment #1 to Regulation 5-74, regarding worker's compensation 
service fees. 

Plan of operation of the Massachusetts Motor Vehicle Reinsurance 
Facility. 

Emergency Regulation 10-77, regarding the Standard Merit Rating 

Plan. 

Emergency Rule of Operation 1 (Massachusetts Motor Vehicle Reinsur- 
ance Facility) . 

Emergency Regulation 11-77, regarding the Massachusetts automobile 
insurance table of short rate values. 

Emergency Rule of Operation 2 (Massachusetts Motor Vehicle Reinsur- 
ance Facility) . 

DECISIONS 

Statutes also give the insurance commissioner the power to hold 
hearings to determine the condition of the insurance marketplace, and, in 
some instances, to set rates. ' These findings were issued after due 
notice and hearing: 

Opinion, Findings and Decision concerning proposed rate adjust- 
ments filed by Blue Cross of Massachusetts, Inc. and Blue Shield of 
Massachusetts, Inc. for non-group rates. 

Opinion, Findings, and Decision concerning revisions in Medex 
Rates effective January 1, 1977 filed by Blue Cross of Massachusetts, 
Inc. and Blue Shield of Massachusetts, Inc. 

Opinion, Findings and Decision on 1976 and 1977 medical malprac- 
tice insurance rates. 

Opinion, Findings and Decision on rates for properties insured in 
the FAIR Plan. 

Report of Examination: assignments to the Motor Vehicle Reinsur- 
ance Facility. 

Opinion and Findings on the operation of competition among motor 
vehicle insurers. 

Opinion, Findings and Decision concerning rate revisions to recog- 
nize law benefit increases proposed by the Worker's Compensation Rating 
and Inspection Bureau of Massachusetts. 

The Massachusetts Mandatory Offer Laws: a report to the General 

Court . 

Supplementary Opinion and Decision on the operation of competition 
among motor vehicle insurers. 

Findings, Decision, and Order concerning the proposed Plan of 



10 



Operation filed by the Governing Committee of the Massachusetts Motor 
Vehicle Reinsurance Facility. 

Findings, Decision and Order concerning the operation of the 
Massachusetts Motor Vehicle Reinsurance Facility. 

Opinion, Decision and Order concerning worker's compensation ser- 
vice fees provided in Regulation 5-74. 

Opinion, Findings and Decision on 1978 automobile insurance rates. 



The Division also issued decisions or agreed to consent orders in 
the following cases of alleged misconduct by agents, brokers, companies 
and other miscellaneous matter. 

Re: Arnold Deluty (Marco Insurance Agency). 

Re: Daniel R. F. Potter. 

Re: Marvin L. Adelson and Richard L. Adelson (consent order). 

Re: James DeFronzo and Kimlee Restaurant, Inc. v. Roger E. 
Ingalls . 

Re: Mary T. Roche (consent order). 

Re: Academy Life Insurance Company. 

Re: Russell C. Chapman Insurance Agency, Inc. and Stephen J. 
Packard. 

Re: All Type Insurance Agency, Inc. and Gerald W. Savoie. 

Re: Ronald L. Richardson. 

Re: Allen Wilkinson (consent order). 

Re: Frances L. Alix. 



Companies 



FINANCIAL EXAMINATIONS 



Each year, as required by law, the Division of Insurance routinely 
examines approximately one third of all Massachusetts-based insurance 
companies, and one third of all retirement systems for Massachusetts 
public employees. 

Companies : 

Abington Mutual Fire Ins. Co. 
American Employers Ins. Co. 
Arrow Mutual Liability Ins. Co. 
Artisans Life Ins. Cooperative Soc. 
Barnstable County Mutual Fire Ins. Co. 
Bay State Ins. Co. 
Berkshire Life Ins. Co. 
Cambridge Mutual Fire Ins. Com. 
Colonial Penn Ins. Co. 
Commerce Ins. Co. 
Commercial Union Ins. Co. 
Commercial Union Reinsurance Co. 



12 



Electric Ins. Co. 

Electric Mutual Liability Ins. Co. 

Employers Fire Ins. Co. 

Hartford Life Ins. Co. 

Holyoke Mutual Ins. Co. 

John Hancock Mutual Life Ins. Co. 

Mass Indemnity and Life Ins. Co. 

Mass Plate Glass Ins. Co. 

Merrimack Mutual Fire Ins. Co. 

Monarch Life Ins. Co. 

Northern Assurance Co. of America 

THE Ins. Co. 

Worcester Mutual Ins. Co. 



MARKET CONDUCT EXAMINATIONS 

Market conduct examinations, which show how a company operates and 
how well it treats its policyholders, have traditionally been one part of 
financial examinations. In 1977, however, the Division began examining 
companies, agencies and brokerages solely with regard to their market 
conduct . 



Retirement systems : 



Arlington 

Barnstable County 

Berkshire County 

Brookline 

Dukes County 

Chelsea 

Concord 

Essex County 

Everett 

Falmouth 

Framingham 

Greenfield 

Hingham 

Hampshire County 

Leominster 

Maiden 

Marblehead 

Maynard 

Methuen 



Newton 

North Adams 

Northampton 

Northbridge 

Pittsf ield 

Plymouth 

Norfolk County 

Plymouth County 

Salem 

Shrewsbury 

Somerville 

Southbridge 

Springfield 

Webster 

Wellesley 

Westf ield 

West Springfield 

Weymouth 

Worcester 



Companies 



Boston Mutual Life Ins. Co. 

Colonial Penn Ins. Co. 

Life of America Ins. Corp. Boston 



13 



Agencies and brokerages 



Avenue Ins. Agency 


McDuf f ie 


Baker 


McGunnigle 


Bankers Life 


McQueen 


Bel-Mar 


Medford Sq. 


Berman 


Metro 


Black 


Nicholls 


Bodner 


Oster 


Brighton 


Pace 


Brochu 


Porter Sq. 


Brookf ield 


Rappola-Morante 


E.J. Bruce 


Roc co Rose 


Chickering 


Roche 


Chmura 


Rock , Inc . 


Claremont 


Rut stein 


Columbus 


Shire City 


Dowling 


Slovin 


Finn 


Stadium 


Friedman Bros. 


Sokoll & Lowenthall 


Froebel 


TKO of Holyoke, Inc. 


Gallagher 


TKO-Northampton 


Joseph Grant 


TKO-Westfield 


Greater Lawrence 


TKO-West Springfield 


Independence 


Town Line 


Kaplan sky 


Velucci 


Kuneoich & Law 


Waxman 


David Large 


West 


Philip Leader 


Wilde 


Main Street 


Wise 


Marquis 


Zaharis 


John E. McDonald & Sons 





CHANGES 

These companies were admitted in 1977 to do business in Massachu 
setts; the state of incorporation is shown in parentheses after the com 
pany name : 

Acacia National Life Ins. Co. (Virginia) 
Agway Life Ins. Co. (New York) 
Allianz Ins. Co. (California) 
American Economy Ins. Co. (Illinois) 
American Mortgage Ins. Co. (North Carolina) 
American States Ins. Co. (Indiana) 
Arnica Life Ins. Co. (Rhode Island) 
Automobile Club Ins. Co. (Ohio) 
Balboa Ins. Co. (California) 

Commercial Credit Mortgage Ins. Co. (Maryland) 
Equitable General Ins. Co. (Texas) 



14 



Equitable Variable Life Ins. Co. (Texas) 
Federal Life Ins. Co. (Illinois) 
Indianpolis Life Ins. Co. (Indiana) 
Liberty Life Ins. Co. (Sourth Carolina) 
Metropolitan Ins. and Annuity Co. (Delaware) 
Motor Vehicle Casualty Co. (Illinois) 
Security Ins. Co. of Hartford (Connecticut) 
The Canada Life Assurance Co. (Michigan) 
The Centennial Ins. Co. (Kansas) 

The Fidelity & Casualty Co. of New York (New Hampshire) 
Ticor Mortgage Ins. Co. (California) 
Wisconsin National Life Ins. Co. (Wisconsin) 

These companies withdrew from writing insurance in Massachusetts; 
the state of incorporation is shown in parentheses after the company 
name : 

Academy Life Ins. Co. (Colorado) 
Columbus Mutual Life Ins. Co. (Ohio) 
Consolidated Mutual Ins. Co. (New York) 
Grain Dealers Mutual Ins. Co. (Indiana) 
Maryland Casualty Co. (Maryland) 

The Millers Mutual Fire Ins. Co. of Texas (Texas) 

Pennsylvania Lumbermen's Mutual Ins. Co. (Pennsylvania) 

Security Ins. Co. of Hartford (Connecticut) 

United America Underwriters (Missouri) 

United American Life Ins. Co. (Colorado) 

United Security Ins. Co. (New Jersey) 

Worldwide Life Ins. Co. (Colorado) 



These companies were renamed; the state of incorporation is shown 
in parentheses for both the old and the new names: 



Allied Ins. Co. (California) is now INA Underwriter's Ins. Co. 
(California) . 

Continental Mortgage Ins., Inc. (Wisconsin) is now Verex Assur- 
ance, Inc. (Wisconsin). 

Leatherby Ins. Co. (California) is now Western Employers Ins. Co. 
(California) 

Lumber Mutual Fire Ins. Co. of Mass. (Massachusetts) is now 
Lumber Mutual Ins. Co. (Massachusetts) 

Peoples-Hume Life Ins. Co. (Indiana) is now Federal Home Life 
Ins. Co. (Michigan) . 

For more extensive data on any insurance company that operates in 
Massachusetts, the reader should consult the proper volume of Best' s 
Insurance Reports , or examine the company's financial statement on file 
with the Massachusetts Division of Insurance. 



15 



RECEIVERSHIPS 



Associated Merchants Mutual Insurance Company —Joseph F. Ciccio, 
as receiver for the insurance company, continued to retain in his posses- 
sion the assets of the insurance company. During 1977, the Massachusetts 
Insolvency Fund, pursuant to Chapter 175D, continued with the adjustment 
and disposition of claims by policyholders. Some of the claims were dis- 
puted claims pending in court. The Fund has not disposed of all known 
claims at the present time. 

The receiver reported the following statement of cash assets, 
income and disbursements: 

Balance (Jan. 1, 1977) $ 1,432.38 

Income 11,891.06 

Disbursements 12,348.83 



Balance (Dec. 31, 1977) $ 974.61 

Puritan Marine Insurance Underwriters Corp . — Under the supervision 
of the receiver, Dep. Commissioner Rodney, Michael S. Field, Esquire, was 
appointed counsel to the receiver. Counsel has continued marshalling the 
assets and determining the liabilities in compliance with the law, and 
the rules and regulations concerning the maintenance and operation of the 
affairs of a receivership. Because one of the principals of the insur- 
ance agency was under criminal indictment during 1977, counsel to the 
receiver was unable to conduct an examination of the principal, which was 
necessary to fully determine some of the liabilities and assets of the 
receivership. However, counsel for the receiver is now informed that the 
principal in question is no longer the subject of criminal proceedings, 
and will shortly be available for examination. The balance in the check- 
ing account of the receivership as of January 1, 1978 was $10,096.86. 
There is an additional $250.00 for deposit. 

Rockland Mutual Insurance Company — The property, records and 
effects of the company are held in the receiver's custody and control at 
112 Water Street, Boston, Massachusetts, 02109. Claims, priority and 
general, in an amount in excess of $7 million have been submitted to the 
receiver. Through his counsel, Edward T. Dangel III, the receiver is liti- 
gating and collecting various sums alleged to be due the receiver. As 
of October 31, 1977, the date of the last accounting to the Supreme 
Judicial Court, the cash on hand was $33,186.19; the value of the common 
stocks, bonds and treasury notes, at cost, was $252,000. 

Suffolk Insurance Company — Joseph F. Ciccio, as receiver, with 
the assistance of legal counsel, continued disposing of claims of injured 
persons against policyholders of Suffolk Insurance Company. Various 



16 



claims were negotiated and settled. 

On June 20, 1977 , the Supreme Judicial Court allowed payment of 
these claims, totaling $7,031.25. In addition, the court allowed payment 
of attorney fees in the amount of $4,611.00. 

The Receiver reported the following statement of assets, income, 
and disbursements: 

Balance (Jan. 1, 1977) $222,681.94 
Income 11,613.70 
Disbursements 21,614.56 



Balance (Dec. 31, 1977) $212,681.08 

Summit Insurance Company of New York, Inc . --In 1977, the ancillary 
receivership continued as set up in 1975, with Edmund E. Fleming as 
counsel to the ancillary receiver. 

The receiver continued to pursue and marshall the assets of Summit 
located in the Commonwealth. Several law suits were in progress, either 
being prosecuted for the purpose of marshalling assets, or defended on 
claims. Auditing activities were undertaken to ascertain the amount of 
assets available, and the affairs of Summit were subjected to investiga- 
tion and scrutiny to attempt to gain insight into the causes of the 
insolvency and the nature of the affairs of Summit in Massachusetts. 
Claims against the estate of Summit which have been filed in Massachu- 
setts were being investigated and processed. 

LIFE VALUATIONS 

Each year, the Division of Insurance must assign a value to the 
reserves of Massachusetts-based life insurance companies. In 1977, the 
fee for this valuation amounted to $756,997.09. The fee is set according 
to this formula: for each $1000 of life insurance in force on December 
31, a fee of four mills is charged; for each annuity contract or supple- 
mentary contract with life contingencies, a fee of four cents is charged. 



Annual Report, 1978 
Division of Insurance 



3m 3 i State Library of MassachusoSis 

™ 1 State House, Boston 



State In— - o! ' k "- — .chuseff 



5iOn 



This report was produced pursuant to 
Chapter 175, Section 17 of The Massachusetts General Laws 



Michael S. Dukakis 
Governor of Massachusetts 



James M. Stone 
Commissioner of Insurance 



Massachusetts 
Division of Insurance 



Contents 

Progress Report 1 

Laws, Regulations & Decisions 4 

Laws 4 

Regulations 5 

Decisions 6 

Companies 8 

Financial Examinations 8 

Market Conduct Examinations 9 

Changes 11 

Receiverships 12 

Life Valuations 14 



Progress Report 



This was a year of consolidation in Massachusetts automobile 
insurance markets, following several years of significant structural 
change. The Division of Insurance took advantage of the relatively 
calm public policy environment to act on a number of matters deferred 
from 1977. The reorganization of the Division is now complete. The 
personnel complement stands at 217 versus 309 in the beginning of 1975. 
The fiscal 1979 budget is 10% below the fiscal 1975 budget for Division 
administration. The number of CPA's, attorneys, actuaries, Ph.D's and 
MBA's on the staff is approximately five times the equivalent number in 
1975. 

In addition to the normal work of the Division, important steps 
were taken in the following areas during 1978: 

I . Casualty Insurance Rate Review 

There being no court action or legislative controversy over 
automobile insurance this year, the principal tasks of the Division in 



2 



that line involved implementation or extension of the new classification 
approach announced in 1977. Division representatives were asked to 
testify in New York, New Jersey, Pennsylvania, Illinois, Texas, Florida 
and other states on the advantages of individual incentive based classi- 
fications over the traditional statistical grouping classifications. 
In setting the 1979 rates, the Division further developed the incentive 
concept by allowing a discount of 10% on property damage liability and 
collision coverages for regular pre-paid users of public transit com- 
muting systems. Territorial rate differentials were further attenuated 
for 1979 by limiting the agency commission allowance differentials in 
the rate. The 1979 commission allowances will vary only between a 
specified minimum and maximum payment. 

Rates for 1979 automobile insurance will be 2% below this year's 
rates on a statewide average basis. This gives Massachusetts a four 
year average increase of 2.8% per year, as opposed to an average annual 
consumer price index change of 6.2%. Boston is no longer the highest 
rated city in the nation. Premium rates for many urban drivers with 
clean records, in fact, have fallen over the last four years. Only 
drivers with merit surcharges have received large increases. 

There were no major issues concerning rates for workers' compen- 
sation, homeowners or other casualty coverages during 1978. 

II . Examination and Enforcement Activities 

The Division continued its recent emphasis on targeted investi- 
gations of licensee market conduct during 1978. Primarily as a result 
of inquiries into urban casualty insurance overcharges and into the 
sales of dubious health insurance products to the elderly, numerous 
licensees were subject to suspensions or revocations during the year. 
Restitution payments in these cases have now exceeded two million 
dollars. 

During the fall of 1978, the Division initiated four intensive 
market conduct audits of companies selling dread disease policies in 
the Commonwealth. These audits, conducted jointly by outside CPA 
firms, attorneys, and Division examiners, have indicated numerous vio- 
lations of Massachusetts laws and regulations. Disciplinary proceed- 
ings, and possible legislative recommendations, are presently being 
prepared on the basis of the audits. 

III. Rules and Regulations 

In the last session of the General Court, legislation was 
passed authorizing the formation of pre-paid legal service plans in the 
Commonwealth. The Division has prepared regulations under the statute 
to safegard plan solvency and subscriber protection when such programs 
are initiated. 



3 



Licenses for the operation of more than half a dozen health 
maintenance organizations have now been issued under 1977 Division regu- 
lations. After a lengthy hearing and initial license denial, the first 
independent practice HMO agreed to meet Division standards and was 
granted a license. 

In May, the Division issued a regulation governing the licensure 
and conduct of motor vehicle damage appraisers. The rules are designed 
to eliminate widely perceived abuses and conflicts of interest currently 
adding unnecessarily to the cost of automobile insurance. 

The 1977 readable policy law mandates that every policy sold in 
Massachusetts after June of 1979 be written in clear non-technical 
language and contain a meaningful summary of the coverage. The Division 
devoted considerable time in 1978 to preparation of standards under the 
new law. Particular emphasis is being given to health insurance and 
life insurance. Current drafts of the proposed standards for health 
insurers would greatly simplify coverage terms, while those for life 
insurance would introduce a rate of return disclosure requirement for 
all cash-value policies. 

IV. Publications 

To further educate consumers on complex insurance purchase 
choices and to record the technical advances produced by Division 
research, a number of publications were prepared and issued in 1978. 
In keeping with recent tradition, the Division produced a 1979 version 
of its annual automobile insurance buyers guide. It also produced and 
widely distributed a booklet entitled Insuring Your Health: A Guide 
to Buying and Using Health Insurance Policies . A complete compilation 
of this Administration's formal findings was published as a series of 
volumes of Regulations and Decisions . The five 1977 research papers 
of the State Rating Bureau on automobile insurance classifications and 
the portions of the 1978 rate decision dealing with that subject were 
published in book form as Automobile Insurance Risk Classification: 
Equity and Accuracy . 

At the close of the term, the four year history of the Division 
during this administration was summarized in a two volume publication 
entitled Management Report: The Massachusetts Division of Insurance 
from 1975 to 1978 . 

Copies of all of these publications are available from the 
Division or the State Bookstore. 



Laws, Regulations 

& Decisions 



LAWS 



In 1978 the General Court passed, and the Governor approved, the 
following acts of legislation, which have a direct effect on the insur- 
ance business in Massachusetts. The number identifying each act is the 
chapter number assigned to it during the 1978 session of the General 
Court. 

Chap. 63, increasing insurance coverage on certain professional 

boxers. 

Chap. 90, facilitating the payment of certain claims under two 
thousand dollars to estates by insurance companies. 

Chap. 132, further defining automobile club service contract. 

Chap. 133, extending the hospital lien law to include health 
maintenance organizations and non-profit hospital, medical and dental 
service corporations. 

Chap. 260, relative to the insurance coverage of the surviving 
spouse of an employee or retired employee of certain governmental units. 

Chap. 271, relative to insolvent insurance companies. 

Chap. 341, further regulating deferred compensation programs for 
public employees. 



5 



Chap. 358, prohibiting certain exclusions in insurance policies 
or health and welfare fund contracts relating to certain expenses 
incurred by an insured in a soldiers' home of the Commonwealth. 

Chap. 361, providing for prior public hearing and approval of 
rates charged directly to subscribers by contract commonly known as 
Medex. 

Chap. 402, further regulating the compensation of certain 
officers of medical and nonprofit hospital service corporations. 

Chap. 424, providing that claims for medical benefits may be 
heard at a conference. 

Chap. 425, increasing the funeral benefits for certain deceased 
employees under the Workmen's Compensation Act. 

Chap. 431, increasing the membership of the board of directors 
of the medical malpractice joint underwriting association. 

Chap. 440, mandating that fire and casualty insurance companies 
may not require of agents and brokers payment of accounts current 
earlier than fifty days of the close of the month in which such fire 
and casualty policies are written or effective date of the policy. 

Chap. 446, regulating contracts of insurance against losses by 
fire and providing for increased cooperation between insurance companies 
and law enforcement agencies in the investigation of such losses. 

Chap. 461, increasing benefits for dependents of deceased 
employees under the Workmen's Compensation Act. 

Chap. 511, relative to motor vehicle rates charged to motorists 
age 65 and over. 

Chap. 512, establishing a claims and indemnity procedure for the 
Commonwealth, its municipalities, counties and districts and the 
officers and employees thereof. 

Chap. 574, relative to the services provided by medical service 
corporations . 

REGULATIONS 



To complement the laws governing insurance, the Massachusetts 
Division of Insurance used its statutory authority to issue rules and 
regulations. The rules and regulations adopted or repealed in 1978 are 
shown below, in the order in which they were acted upon. 

Regulation 3-74, regarding insurance issued pursuant to a group 
marketing plan (repealed) . 

Regulation 2-75, regarding equal employment opportunity in the 
insurance industry (repealed) . 

Regulation 2-78, regarding the Massachusetts automobile insur- 
ance table of short rate values. 

Emergency Regulation 3-78, regarding the Standard Merit Rating 

Plan. 

Regulation 1-78, regarding the appraisal and repair of damaged 
motor vehicles. 

Regulation 3-78, regarding the Standard Merit Rating Plan. 



6 



Regulation 4-78, regarding reductions in premium charges for 
private passenger motor vehicles and certain commercial motor vehicles 
equipped with an anti-theft mechanism as authorized by Section 4(d) of 
Chapter 175E of the Massachusetts General Laws. 

Regulation 5-78, regarding procedural rules for disciplinary 
hearings. 

DECISIONS 

Statutes also give the insurance commissioner the power to hold 
hearings to determine the condition of the insurance marketplace, and, 
in some instances, to set rates. These decisions were issued after due 
notice and hearing: 

Opinion, Findings, and Decision on workers* compensation rates. 

Opinion, Findings, and Decision concerning revisions in Medex 
rates to be effective April 1, 1978 filed by Blue Cross of Massa- 
chusetts, Inc. and Blue Shield of Massachusetts, Inc. 

Decision concerning Crum and Forster's auto insurance rate 
deviation. 

Opinion, Decision, and Order concerning the amendment to Rule 2 
and proposed Rules 18A and Rule 19A as filed by the Massachusetts Motor 
Vehicle Reinsurance Facility. 

Opinion, Findings and Decision on 1978 medical malpractice 
insurance rates. 

Approval of a general revision of workers' compensation rates 
to be effective April 1, 1978. 

Opinion, Decision, and Order concerning amendments to Rules 2 
and 6 and proposed Rule 3A as filed by Massachusetts Motor Vehicle 
Reinsurance Facility. 

Opinion, Decision and Order concerning the proposed amendment to 
Rule 6 as filed by the Massachusetts Motor Vehicle Reinsurance Facility. 

Decision on proposed accident and health rate requested by four 
insurance companies of the Commercial Union group. 

Opinion, Decision and Order concerning the proposed amendment 
to Rule 6 as filed by the Massachusetts Motor Vehicle Reinsurance 
Facility. 

Opinion, Findings and Decision on the operation of competition 
among motor vehicle insurers. 

Findings and Conclusions on proposed homeowners rates requested 
by Prudential Property and Casualty Insurance Company. 

Opinion, Findings and Decision on the application of Bay State 
Health Care Foundation, Inc. , to be licensed as a health maintenance 
organization under General Laws, Chapter 176G. 

Opinion, Findings and Decision concerning Blue Shield non-group 
Plan J rates. 

Decision and Order concerning the proposed amendment to Rule 20 
filed by the Massachusetts Motor Vehicle Reinsurance Facility. 

Decision on the application of Central Massachusetts Health 



7 



Care, Inc., to be licensed by the Division of Insurance pursuant to 
General Laws, Chapter 176G. 

Opinion, Findings and Decision on 1979 Medical Malpractice 

Rates. 

Opinion, Findings and Decision on 1979 Automobile Insurance 

Rates . 

Approval of a revision of workers' compensation rates to be 
effective December 1, 1978. 



The Division also issued decisions or agreed to consent orders 
in the following cases of alleged misconduct by agents, brokers, com- 
panies and other miscellaneous matters. 

Re: Appeal of the Allstate Insurance Co. from rulings of the 
Massachusetts Motor Vehicle Reinsurance Facility Governing Committee. 

Re: Appeal of the Commercial Union Assurance Cos. from rulings 
of the Massachusetts Motor Vehicle Reinsurance Facility Governing 
Committee. 

Re: James H. Slovin Ins. Agency, Inc. and James H. Slovin. 

Re: Appeal of the Newton Pierce Ins. Agency, Inc. from rulings 
of the Massachusetts Motor Vehicle Reinsurance Facility Governing Com- 
mittee. 

Re: B.S. Costello, Inc. v. Workers' Compensation Rating and 
Inspection Bureau of Massachusetts. 

Re: Bobbie J. Graham, d/b/a Bobbie J. Graham Ins. Agency. 
Re: Elmer J. Bruce, Jr. and E.J. Bruce Ins. Agency, Inc. 
Re: H.J. Realty v. Lyness. 

Re: Guarantee Trust Life Ins. Co. (consent order) . 
Re: United Equitable Ins. Co. (consent order). 
Re: TKO Ins. Agency, Inc., John E. MacDonald & Son Ins. 
Agency, Joel Finkel, Milton Finn, Gwendolyn James, and David Winn. 

Re: Bel-Mar Ins. Agency, Inc. and Marjorie Feinberg (consent 

order) . 

Re: Appeal of Lawrence H. Fisher, under Section 101B, 
Chapter 175. 

Re: Norman B. Harrison. 

Re: Louis A. Wolpert and Wolpert Ins. Agency Inc. (consent 

order) . 

Re: James Ford (consent order) . 

Re: Andrew C. Maddaleni. 

Re: Life Assurance Co. of Pennsylvania. 

Re: Ronald C. MacKenzie. 

Re: Cooke & Currie Ins. , Ltd. v. Massachusetts Motor Vehicle 
Reinsurance Facility. 

Re: American Manufacturers Mutual Ins. Co. v. Massachusetts 
Motor Vehicle Reinsurance Facility. 



Companies 



FINANCIAL EXAMINATIONS 



Each year, as required by law, the Division of Insurance 
routinely examines approximately one third of all Massachusetts-based 
insurance companies, and one third of all retirement systems for 
Massachusetts public employees. 

Companies : 

Attleboro Mutual Fire Ins. Co. 

Berkshire Mutual Ins. Co. 

Boston Mutual Life Ins. Co. 

Boston Old Colony Ins. Co. 

Fitchburg Mutual Fire Ins. Co. 

Hingham Mutual Fire Ins. Co. 

Loyal American Life Ins. Co. 

Lumber Mutual Ins. Co. 

Massachusetts General Life Ins. Co. 

Massachusetts Title Ins. Co. 

New England Mutual Life Insurance Co. 



9 



Retirement systems : 



Amesbury 
Arlington 



Bristol County 
Everett 
Fairhaven 
Hampden County 
Hampshire County 



Melrose 
Milford 
Natick 
Needham 



New Bedford 
Newburyport 



Haverhill 
Hull 



Norwood 
Saugus 



Marlboro 



Lawrence 
Lowell 



State Employees 
Stoneham 
Worcester 
Worcester County 



MARKET CONDUCT EXAMINATIONS 



Market conduct examinations, which show how a company operates 



and how well it treats its policyholders, have traditionally been one 
part of financial examinations. Since 1977, however, the Division has 
been examining companies, agencies and brokerages separately with re- 
gard to their market conduct. 



American Family Life Assurance Co. 
American Income Life Ins. Co. 
Liberty Life Assurance Co. of Boston 
Liberty Mutual Fire Ins. Co. 
Liberty Mutual Ins. Co. 
Massachusetts Mutual Life Ins. Co. 
Middlesex Ins. Co. 
Patriot General Ins. Co. 
Patriot General Life Ins. Co. 
Union Fidelity Life Ins. Co. 
Washington National Ins. Co. 



Companies : 



Agencies and brokerages : 



Abodeely Ins. Agency 



Bodner 

Bradley, Estes & Strumski 

Brennan 

Brighton 

Brookf ield 

Buckley 

CSC Ins. Services of Mass. Inc. 

Cadell & Byers 

Cain 

Campagna 

Carberry & Conlin 



Apollo 
Avenue 
Aztec 
Baker 



Bay Colony 

Beebe, Blakely & Forbes 
Bel-Mar 



Berman 

Berry 

Black 



10 



Carrick 

Central Square 

Chickering 

Chmura 

Claremont 

Clark-Prout 

Columbus 

Conro 

Coordinated Financial Planning Inc 

Creese 

Danca 

Davis, Davis and Moody 

Dekel 

Domingo s 

Donohue 

Dooley 

Dowling 

E & G 

Economy 

Finn 

First Service Insurance Inc. 

Fitzgerald 

Flynn 

Ford 

Forti 

Friedman Bros. 

Froebel 

Gallagher 

Gallant & Brock 

Georgetown 

Gold & Son 

Graham 

Great Northern 

Greater Lawrence 

Green, Isenberg, Small 

Haberman 

Heritage 

Holman 

Independence 

Ivester 

Kaplansky 

Kimball 

Koritz 

Kunevich & Lau 
Latanzi 
Levenbaum 
Leone 

MacShawson 
Main Street 
Malcolm & Parsons 
F.L. Malcolm 



Mallozzi 
Marchione 
Marquis 
Mattei 

McCormick & Toole 
McDonald & Sons 
McDuf f ie 
McFadden 
McGunnigle 
McQueen 

Medford Square 

Merrill 

Metro 

Mid-State 

Mirabito 

Monte 

Mottard 

Munro 

Nicholls Insurance Inc. 

Norwood 

O'Brien 

Oster 

Pace 

Pantos 

Patriot 

Peterson 

Plainville 

Porter Square 

Potter 

R & S 

Rapollo 

Richardson 

Riverside 

Roche 

Rocco Rose 
Rock 

Rodrigues Co. 

Rutstein 

Ryan 

Savin Hill 
Scribner 
Shire City 
Shirley 

Simons Company Inc. 
Slovin 

Snapper /Leader 

Sokoll & Lowenthal 

Stadium 

Stevens 

Stevenson 

J. P. Sullivan 



11 



W. F. Sullivan 

Sweeny & Sons 

Tag International 

Tamarack 

Thornton 

Tocci 

Town Line 

TKO 

TKO of Holyoke 

Traver 

Tully 

United Brokers Inc. 



Vellucci 



Walker 

Waxman 

Wells 

West 

Wilde 

Willis 

Wise 

Woods 

Young 



Zaharris 



Motor Clubs: 



Cross Country Motor Club Inc. 
Motor Club of America 
New England Motor Club Inc. 
Universal Motor Club Inc. 



CHANGES 

These companies were admitted in 1978 to do business in Massa- 
chusetts; the state of incorporation is shown in parentheses after the 
company name: 



American Re-Insurance Co. (Delaware) 
Atlas Assurance Co. of America (New York) 
Cumberland Life Ins. Co. (Tennessee) 
Eagle Star Ins. Co. of America (New York) 
Fort Dearborn Life Ins. Co. (Illinois) 
Guarantee Ins. Co. (Texas) 

The Hartford Life Ins. Co. of Connecticut (Connecticut) 

Heritage Life Ins. Co. (Arizona) 

Kemper Investors Life Ins. Co. (California) 

Monumental Life Ins. Co. (Maryland) 

Philadelphia Life Ins. Co. (Pennsylvania) 

Proprietors' Ins. Co. (Ohio) 

Prudential Reinsurance Co. (Delaware) 

St. Paul Life Ins. Co. (Minnesota) 

Stewart Title Guaranty Co. (Texas) 



These companies withdrew from writing insurance in Massa- 
chusetts; the state of incorporation is shown in parentheses after the 
company name : 



Georgia International Life Ins. Co. (Georgia) 

Indianapolis Life Ins. Co. (Indiana) 

Integrity National Life Ins. Co. (Pennsylvania) 



12 



National Travelers Ins. Co. (Iowa) 
Security Mutual Ins. Co. (Illinois) 
White Cross Ins. Co., Ltd. (England) 

These companies were renamed; the state of incorporation is 
shown in parentheses for both the old and the new names: 

Allstate Fire Ins. Co. (Illinois) is now Northbrook Property 
and Casualty Ins. Co. (Illinois). 

American Eagle Life Ins. Co. (New Jersey) is now Crum & Forster 
Life Ins. Co. (New Jersey) . 

First Investment Annuity Co. of America (Pennsylvania) is now 
Investors Life Ins. Co. of North America (Pennsylvania) . 

Gambles Ins. Co. (Minnesota) is now John Alden Ins. Co. 
(Minnesota) . 

Investors Mortgage Ins. Co. (Illinois) is now Tiger Investors 
Mortgage Ins. Co. (Illinois). 

Northbrook Ins. Co. (Illinois) is now Northbrook Excess and 
Surplus Ins. Co. (Illinois) . 

Old Security Casualty Ins. Co. (Missouri) is now American 
Continental Ins. Co. (Missouri) . 

Providence Washington Life Ins. Co. (Rhode Island) is now NN 
Providence Life Ins. Co. (Rhode Island). 

Volkswagen Ins. Co. (Arkansas) is now Wausau Underwriters Ins. 
Co. (Arkansas) . 

Loyal Protective Life Ins. Co. (Massachusetts) ceased to be 
licensed when it merged into Massachusetts General Life Ins. Co. (Massa- 
chusetts) . 

For more extensive data on any insurance company that operates 
in Massachusetts, the reader should consult the proper volume of Best ' s 
Insurance Reports , or examine the company's financial statement on file 
with the Massachusetts Division of Insurance. 



RECEIVERSHIPS 

Associated Merchants Mutual Insurance Company — Joseph F. Ciccio, 
as receiver for the insurance company, continued to retain in his pos- 
session assets of the insurance company. During 1978, the Massachusetts 
Involvency Fund, pursuant to Chapter 175D, continued with the adjustment 
and disposition of claims by policyholders. Some of the claims are 
disputed and are pending in court. The Fund has not disposed of all 
known claims at the present time. 

On October 19, 1978, the Supreme Judicial Court authorized the 
sale of all furniture and fixtures of the company. After selling the 
furniture and fixtures, the receiver vacated the premises occupied by 
the insurance company and removed the records of the company to a 
storage area. 



13 



Century Fire and Marine Insurance Company — In 1978, the receiv- 
ership continued as set up in 1977, with Deputy Commissioner Keith R. 
Rodney as receiver and Philip A. Mason as counsel to the receiver. At 
the request of the receiver, the CPA firm of Peat, Marwick, Mitchell 
and Co. assisted counsel in organizing, categorizing and listing infor- 
mation concerning potential claimants of Century. Also, from informa- 
tion obtained from Century and receivership records, Peat, Marwick, 
Mitchell and Co. prepared, without audit, a summary listing of possible 
assets and liabilities as of April 30, 1978: Assets and Possible As- 
sets - $1,252,700; Liabilities and Possible Liabilities - $4,130,600. 
The records and effects of the company are held in the receiver's cus- 
tody and control at the counsel's office, Government Center, Boston, 
Massachusetts, 02108. 

Empire Mutual Insurance Company — Deputy Commissioner Keith R. 
Rodney, as temporary ancillary receiver, continued to retain in his 
possession the assets of the insurance company. During 1978, the 
Massachusetts Insolvency Fund, pursuant to Chapter 175D, continued with 
the adjustment and disposition of claims by policyholders. The Fund 
has not yet disposed of all known claims. 

Puritan Marine Insurance Underwriters Corporation — In 1978, the 
receivership continued as set up in 1976, with Deputy Commissioner Keith 
R. Rodney as receiver and Michael S. Field as counsel to the receiver. 
Counsel has continued marshalling the assets and determining the liabil- 
ities. The property, records and effects of the company remain at the 
offices of the counsel. 

Rockland Mutual Insurance Company — Claims, priority and general, 
in an amount in excess of $8 million have been submitted to the receiv- 
er, Commissioner James M. Stone. Through his counsel, Edward T. Dangel, 
III, the receiver has analyzed all of the claims filed and is prepared 
to report his recommendations to the Supreme Judicial Court. In addi- 
tion, the receiver is litigating and collecting various sums alleged to 
be due the receivership. As of December 31, 1978, the cash on hand was 
$26,000; the value of common stock, bonds and treasury notes, at cost, 
was approximately $250,000. The property, records and effects of the 
company are held in the receiver's custody and control at 112 Water 
Street, Boston, Massachusetts, 02109. 

Suffolk Insurance Company— Receiver Joseph F. Ciccio, with the 
assistance of counsel, continued disposing of insurance and general 
creditor claims against the company. On September 22, 1978, the Supreme 
Judicial Court authorized the refunding of premiums to certain policy- 
holders. 

Summit Insurance Company of New York, Inc. — In 1978, the ancil- 
lary receivership continued as set up in 1975, with Deputy Commissioner 
Keith R. Rodney as ancillary receiver and Edmund E. Fleming as counsel 
to the ancillary receiver. The receiver continued to pursue and mar- 



14 



shal the assets of Summit located in the Commonwealth. Several law 
suits were in progress, either being prosecuted for the purpose of mar- 
shalling assets, or defended on claims. Claims against the estate of 
Summit which have been filed in Massachusetts were being investigated . 
and processed. 

LIFE VALUATIONS 

Each year, the Division of Insurance must assign a value to the 
reserves of Massachusetts-based life insurance companies. In 1978, the 
fee for this valuation amounted to $821,103.17. The fee is set accord- 
ing to this formula: for each $1000 of life insurance in force on De- 
cember 31, a fee of four mills is charged; for each annuity contract or 
supplementary contract with life contingencies, a fee of four cents is 
charged. 



State Library of Massachuse, 
State House, Boston 02 1 J J 



Annual Report, 1979 
Division of Insurance 



)3 



This report was produced pursuant to 
Chapter 175, Section 17 of The Massachusetts General Laws 

Edward J. King 
Governor of Massachusetts 

Michael J. Sabbagh 
Commissioner of Insurance 



200-9-82-170905 



PUBLICATION OF THIS DOCUMENT APPROVED BY JOHN MANTON 



— STATE PURCHASING AGENT 

Estimated Cost Per 



TABLE OF CONTENTS 



Introduction 1 

Legislation 4 

Rules and Regulations 6 

Decisions 7 

Company Information: 

New Licenses — Life, Property and Casualty 9, 10 

"B" Reinsurers 10 

Surplus Lines 11 

Health Maintenance Organizations 11 

Mergers 12 

Withdrawals 12 

Companies in Receivership 13 

Examinations: 

Life Companies 14 

Property and Casualty Companies 15 

Insurance Agencies and Brokers 16, 17 

Fraternal Organizations 18 

Retirement Systems 19 

Miscellaneous Fees and Assessments Collected 20 

Summaries of Massachusetts Business: 

Life 20 

Accident and Health 21 

Property and Casualty 22 



INTRODUCTION 



The Division of Insurance is responsible for the administration and regulation of the business 
of insurance in Massachusetts, and as such, serves all residents of the Commonwealth. The Division 
is organized into the following sections that report directly to the Commissioner. 

The Administration Section is headed by the First Deputy Commissioner. Administrative 
functions such as payroll, personnel, revenue receipt, budget, accounting and EDP programming 
are included within the Administration Section. A monthly report of current personnel obligations, 
adjusted to reflect expected pay level increases and salary reserves is produced. In addition to the 
regular monthly reports, special reports are rendered from time to time detailing individual sub- 
sidiary accounts. Accounts are carefully monitored for fiscal accountability. Occasionally transfers 
from one account to another is necessary to meet due dates. The Administration Section is also 
responsible for equipment inventory, supply, purchasing, repair and maintenance of Division 
equipment and other miscellaneous duties. 

The Research & Education Section is charged with the analysis and research of regulatory 
problems insulated from the pressures of day-to-day operational responsibilities. The section is also 
involved with the Division's work in consumer education through the preparations of informational 
publications. Another area of interest for the research section is the surveillance of the health in- 
surance market. 

The Licensing & Examination Section is headed by the Second Deputy Commissioner. The sec- 
tion is responsible for administering all examinations required of applicants for licensure. To im- 
prove and facilitate the administration of examinations, the Division entered into an agreement 
with Educational Testing Service of Princeton, New Jersey. This contract authorized ETS to 
prepare agent examinations under the supervision of the Commissioner, to administer them and 
report results. 

The duties of the section include the examination of license applications, issuance and renewal 
of licenses to qualified applicants and maintenance of the records of licensees. 

The State Rating Bureau is headed by a Director appointed by the Commissioner. Late in 1975 
the Legislature established a State Rating Bureau in the Division of Insurance and provided the 
Commissioner with the expertise needed to properly analyze, evaluate and recommend rates for 
various insurance coverages. 

The Rating Section is responsible for rate regulation of automobile, homeowners, Blue 
Cross/Blue Shield, workers' compensation and other insurance contracts. They also assist in pro- 
mulgating rating and statistical plans. 

The Policy Forms Section examines for compliance with life insurance non-forfeiture laws and 
evaluations of life insurance reserves. Review and approval or disapproval of various insurance 
policy forms is also the responsibility of the Policy Forms Section. 

The Legal Section is primarily responsible for the drafting of Division regulations. The Legal 
Section initiates numerous enforcement actions leading to suspension or revocation of licenses and 
the imposition of monetary penalties. In addition to the drafting of documents and enforcement 
activity, a substantial portion of the Legal Section's time is devoted to servicing the legal needs of 
other sections within the Division. Services typically include assisting the Consumer Complaints 
Staff and advising the Financial Surveillance, Field Audit, Policy Approval and Agents and 
Brokers staffs. Inquiries from insurance companies and agents, the public and other government 
agencies are answered. 



1 



The Special Investigation Section as the name implies conducts special investigations as 
ordered by the Commissioner. The Section investigates violations of insurance laws reported by 
the public. Collected evidence is referred to the Legal Section for administrative enforcement 
actions and to criminal authorities for prosecution. Questionable practices uncovered during 
examinations by the Field Audit Section, during the handling of consumer complaints by the 
Consumer Service Section, and during review of license applications by the Agents and Brokers 
Section are included among the specialties of this section. 

The Consumer Service Section is responsible for the resolution of cases brought to the atten- 
tion of the Division of Insurance by the general public. The Consumer Service Section acts as a 
conduit between the consumer and his or her insurer when information concerning a policy or a 
claim is not forthcoming or a claimant is not sufficiently informed of the reasons for the insurer's 
position. The following is a statistical summary of the Consumer Service caseload. 

STATISTICAL DATA — SPRINGFIELD AND BOSTON COMBINED 

Total Cases Miscellaneous and 

Handled Information Requests 

15,320 1938 

Closed Cases 

13,382 

HIGHLIGHTS 

The following items highlight the major accomplishments of the Division in 1979. 

I. Designation of Statistical Agent for Automobile Insurance 

The Commissioner designated the Massachusetts Motor Vehicle Reinsurance Facility as his 
statistical agent with respect to motor vehicle policies. 

II. Guidelines for Filing Life Insurance and Annuity Forms 

The Commissioner distinguished "easy-to-read language" from disclosure of relative costs 
in the filing of life insurance and annuity forms. Guidelines for the filing of such forms were 
established. 

III. Easy-to-read Homeowner's Insurance Policy 

The Commissioner announced the completion of a new Massachusetts "plain English" 
Homeowner's insurance policy. The new policy meets the requirements of the Massachusetts 
"easy-to-read" law and follows the simplified automobile policy as the second model policy 
redrafted by the Division of Insurance. 

The model policy does not change the level of coverage in the present policy but merely 
makes it understandable. 

The new policy contains 8,949 words, some 17% fewer words than the present 10,768 word- 
ed policy, and scores 55.11 points on the "Flesch Test." 



2 



IV. Competition Among Motor Vehicle Insurers 

A public hearing was held on May 17, 1979 relative to Section 5 of Chapter 175E of the 
Massachusetts General Law, to determine whether automobile insurance rates were to be filed on a 
competitive basis or be fixed and established by the Commissioner of Insurance. An Opinion, Find- 
ing and Decision dated June 22, 1979 was made suspending competition under Chapter 175E for 
one additional year. 

The Commissioner appointed a Special Task Force to study the feasability of competitive 
rating for automobile insurance. 

The task force was charged to study the feasability of competitive rating and determine 
whether a competitive system can be properly implemented in the Commonwealth 

V. Marketing and Sale of Cancer Insurance and Medicare Supplement Policies 

New regulations involving the marketing and sale of so-called cancer insurance and Medicare 
supplement policies were promulgated. 

The new regulations resulted from special hearings charging alleged abuses involving "cancer" 
and "medigap" policies. 

The new regulations permit qualified health insurers to issue "Specified Disease Coverage" in 
place of cancer policies, and replace the present Medicare Supplement Policies with three different 
Medicare Supplement Policies, each with a specific level of benefits. 

The standards incorporated in the new regulations have effectively corrected many of the 
misconceptions the consumer public has been led to expect from improperly or wrongfully labelled 
insurance policies. 

VI. Merit Rating Credits 

The Commissioner promulgated formulae, calculations, amount and method of distribution 
to be used by insurers to distribute Merit Rating credits in 1980. The credit amounted to $12.00 for 
each qualified insurance motorist. 

VII. 1980 Auto Insurance Rates 

The Commissioner announced automobiles rates for 1980. 

He also announced the implementation of a discount for public transportation users. 



3 



INSURANCE LEGISLATION 



In 1979 the General Court passed and the Governor approved, the following insurance and in- 
surance related amendments to the General Laws. 

Chap. 149, requiring certain insurers to pay certain insurance premiums to independent 
licensed insurance agents. 

Chap. 171, further regulating health maintenance organizations relative to abortions. 

Chap. 182, relative to the appeals procedure for surcharges in merit rating plans for motor 
vehicle insurance. 

Chap. 192, relative to billing and collection of surcharges under motor vehicle insurance 
merit rating plans. 

Chap. 195, requiring insurance companies doing business in the Commonwealth to report to 
the fire marshal adjusted fire losses over one thousand dollars. 

Chap. 197, prohibiting the classification of risks on the basis of age, sex or marital status for 
motor vehicle insurance rates except for certain reduction purposes. 

Chap. 222, relative to requiring insurance policies to be written in a form that can be easily 
understood. 

Chap. 250, authorizing the Chelsea Police Relief Association to pay certain sums of money 
to certain members upon their retirement. 

Chap. 303, further regulating mortage investments of domestic insurance companies. 

Chap. 304, relating to the authorization of certain domestic insurance companies to insure 
individuals and members of his or her family for costs of legal services. 

Chap. 330, providing for the payment of certain death benefits to members of the Wakefield 
Police Relief Association, Inc. upon their retirement from the Police Depart- 
ment of the town of Wakefield. 

Chap. 332, further regulating a board of directors approval of certain salaries in domestic 
insurance companies. 

Chap. 354, requiring insurance policies to be written in a form that can be easily understood. 
Chap. 365, further regulating medical service corporations. 
Chap. 372, relative to the General Insurance Guaranty Fund. 

Chap. 375, increasing interest rates charged by insurers on certain life insurance policy loans 
to policy holders. 

Chap. 399, authorizing the use of later mortality tables by fraternal benefit societies. 
Chap. 401, providing for short rate cancellation of policies. 



4 



Chap. 405, increasing the membership of the board of directors of the Massachusetts Urban 
Area Insurance Placement Facility. 

Chap. 471, further regulating the cancellation of certain fire insurance policies and 
contracts. 

Chap. 473, further regulating the distribution of risks among companies issuing motor vehi- 
cle insurance. 

Chap. 515, extending the Medical Malpractice Insurance Joint Underwriting Association. 

Chap. 526, making a corrective change in the law relative to medical service corporations. 

Chap. 558, relative to the reserve of life insurance companies, and nonforfeiture benefits for 
life insurance policies and individual deferred annuities. 

Chap. 611, increasing the minimum limits of liability under motor vehicle liability bonds and 
motor vehicle liability policies issued under the Personal Injury Protection In- 
surance Law. 

Chap. 698, providing that certain part-time employees of the Commonwealth shall be eligi- 
ble for the Group Life and Health Insurance coverage applicable to persons in 
the service of the Commonwealth. 

Chap. 743, providing certain medical service coverage for certain employees and their 
survivors. 

Chap. 776, allowing insurers to offset unpaid premiums from amounts owed on claims. 



5 



RULES AND REGULATIONS 



The Division of Insurance promulgated the following Rules and Regulations during the year 
21 1 CMR 90.00, Legal Services Plans. 

21 1 CMR 42.00, Minimum Standards of Full and Fair Disclosure 
for the Form and Contents of Accident and 
Sickness Insurance Sold in the Commonwealth 
of Massachusetts. 

211 CMR 47.00, Individual Accident and Sickness Insurance. 

211 CMR 95.00, Variable Life Insurance. 

211 CMR 79.00, Standard Merit Rating Plan (adopted as an 
emergency regulation). 

211 CMR 39.00, Appraisal and Repair of Damaged Motor 
Vehicles. 



6 



DECISIONS 



The decisions rendered by the Division in 1979 are shown below in chronological order: 

— Decision and Order concerning the proposed regulation of legal services plans. 

— Decision and Order concerning a proposed amendment to the amended schedule of 
benefits filed by Blue Shield of Massachusetts, Inc. 

— Decision and Order concerning the proposed amendment to Rule 14 of the Rules of 
Operation of the Massachusetts Motor Vehicle Reinsurance Facility. 

— Decision and Order concerning proposed Rule of Operation of the Massachusetts Motor 
Vehicle Reinsurance Facility. 

— Findings and Conclusion on the appeal of Ann Cavanaugh from a decision of the 
Massachusetts Motor Vehicle Reinsurance Facility. 

— Opinion, Findings and Decision on 1979-1980 Medex rates. 

— Appeal Decision concerning the proposed regulation of legal services plans. 

— Decision on the petition of William F. Cheverie for a review of the third-referee charges 
of William Restuccia. 

— Dismissal of the appeal of Alexander Altschuller, M.D., Leonard N. Feingold, M.D., 
Clinton N. Levin, M.D., and Thomas E. Zipoli, M.D., d/b/a Hawthorne Medical 
Associates Inc., from a decision of Blue Shield of Massachusetts, Inc. 

— Opinion, Findings and Decision on a method of reimbursing participating dentists pro- 
posed by Dental Service of Massachusetts, Inc. 

— Opinion, Findings and Decision on the operation of competition among motor vehicle 
insurers. 

— Appeal Decision on the appeal of Ann Cavanaugh from a decision of the Massachusetts 
Motor Vehicle Reinsurance Facility. 

— Opinion, Finding and Decision concerning rules and regulations governing individual ac- 
cident and sickness insurance. 

— Opinion, Finding and Decision concerning rules and regulations governing variable life 
insurance. 

— Opinion, Findings and Decision relative to a rate filing for workers' compensation in- 
surance made by the Massachusetts Workers' Compensation Rating and Inspection 
Bureau. 

— Decision and Order on Appeal to the Commissioner of Insurance under General Laws, 
chapter 26, section 7, regarding a proposed amendment to the amended schedule of 
benefits filed by Blue Shield of Massachusetts, Inc. 

— Decision and Order concerning an application of Blue Cross of Massachusetts, Inc., and 
Blue Shield of Massachusetts, Inc., for approval of proposed quarterly non-group rates. 

— Opinion, Findings and Decision on 1980 Automobile Insurance Rates. 

— Order concerning modifications to the existing Massachusetts Automobile Insurance 
Statistical Plan. 

— Opinion, Findings and Decision relative to a rate filing for workers' compensation in- 
surance made by the Massachusetts Workers' Compensation Rating and Inspection 
Bureau. 



7 



Decisions (continued) 

The Division also issued decisions or agreed to consent orders in cases involving alleged 
misconduct by agents, brokers, and motor vehicle damage appraisers. The cases closed out in 1979 
are shown below, in chronological order. 

Re: Brian Swartz, d/b/a Townline Insurance 

Re: Raphael Rodrigues, d/b/a Rodrigues Insurance Agency 

Re: Michael T. Keane 

Re: Steere-Carlin Insurance Agency, Inc., and Russel F. Steere 

Re: Barry & Aiken Insurance Agency, Inc., Paul J. Aiken, and Edmund M. Barry 

Re: New England Marine and Aviation Insurance Agency, Inc., Robert A. Mitchell, Trans- 
Atlantic Marine Insurance Agency, Inc., and Ernest A. Enos. 

Re: Ronnie Williams, d/b/a Ron Williams Insurance Agency 

Re: Stanley K. Block 



8 



COMPANIES 



As of December 31, 1979, there were 771 companies, licensed or approved, transacting 
business in Massachusetts. Also, there were 11 Health Maintenance Organizations (HMO's) 
licensed in the Commonwealth. 



Domestic Life 17 

Domestic Property & Casualty 48 

Domestic Title 2 

Foreign Life 268 

Foreign Property & Casualty 345 

Foreign Title 1 1 

"B" Company Reinsurers 50 

Surplus Lines Carriers 30 



HMO's are licensed by the Division of Insurance under C 176 G. 



Life Companies Admitted in 1979 



Northern National Life Insurance Company 
Bismark, North Dakota 

Guarantee Reserve Life Insurance Company 
Hammond, Indiana 

John Hancock Variable Life Insurance Company 
Boston, Massachusetts 

Royal Globe Life Insurance Company 
Hartford, Connecticut 

Centurion Life Insurance Company 
Des Moines, Iowa 

Cranford, Insurance Company 
Cranford, New Jersey 

Evanston Insurance Company 
Evanston, Illinois 

Great American Surplus Lines Insurance Company 
Cincinnati, Ohio 

Great Southwest Fire Insurance Company 
Scotsdale, Arizona 

Holland-American Insurance Company 
Los Angeles, California 



March 1, 1979 
March 1, 1979 
March 5, 1979 
July 1, 1979 
July 1, 1979 
November 8, 1979 
September 26, 1979 
July 27, 1979 
January 2, 1979 
October 15, 1979 



Companies (continued) 



Property and Casualty Companies Admitted in 1979 

Name of Company 

J. C. Penney Casualty Company 
Westerville, Ohio 

Home Insurance Company 
Indianapolis, Indiana 

Allstate Indemnity Company 
Northfield, Illinois 

Pennsylvania National Mutual Casualty 

Insurance Company 
Harrisburg, Pennsylvania 

Tokio Marine & Fire Insurance Company 
Tokyo, Japan 

Guardsman Life Insurance Company 
West Des Moines, Iowa 

Resources Life Insurance Company 
Wilmington, Delaware 

Government Employees Life Insurance Company 
Washington, D.C. 

Cudis Insurance Society, Inc. 
Madison, Wisconsin 

Reliable Life & Casualty Company 
Madison, Wisconsin 

Safety Insurance Company 
Boston, Massachusetts 



License Issued 

February 9, 1979 

March 26, 1979 
March 30, 1979 
April 20, 1979 

May 31, 1979 
July 1, 1979 
September 20, 1979 
October 16, 1979 
October 29, 1979 
November 1, 1979 
December 12, 1979 



"B" Companies Reinsurers 

Name of Company Date Approved 

Cologne Reinsurance Company of America September 27, 1979 

Stamford, Connecticut 

Constellation Reinsurance Company November 6, 1979 

New York, New York 

Federated Reinsurance Corporation October 9, 1979 

New York, New York 

Fremont Indemnity Company October 12, 1979 

Los Angeles, California 



10 



Companies (continued) 



Surplus Lines Companies 

Name of Company 

Ambassador Insurance Company 
New Bergen, New Jersey 

Belgian General Insurance Company 
Brussels, Belgium 

Nichido Fire & Marine 
Tokyo, Japan 

Colonia Insurance Company 
Cologne, Germany 

Netherlands Insurance Company 
Keene, New Hampshire 

Fidelity & Guaranty Insurance Company 
West Des Moines, Iowa 

Commonwealth Mortgage Assurance Company 
Philadelphia, Pennsylvania 

Preferred Risk Mutual Insurance Company 
West Des Moines, Iowa 

American Excess Insurance Company 
Wilmington, Delaware 

North Star Reinsurance Corporation 
Wilmington, Delaware 



Date Approved 

January 8, 1979 

October 26, 1979 
October 26, 1979 
October 26, 1979 
November 1, 1979 
November 5, 1979 
November 9, 1979 
December 4, 1979 
December 19, 1979 
December 31, 1979 



In 1979, the following Health Maintenance Organizations were licensed to transact business in 
Massachusetts. 



Name of H.M.O. 

Healthway Medical Plan, Inc. 
Brockton, Massachusetts 

Capital Area Community Health Plan 
Latham, New York 



Date Licensed 

August 22, 1979 

May 10, 1979 



11 



Companies (continued) 

In 1979, the following mergers were effected. 

Hartford Life Insurance Company merged into Hartford Life Insurance Company of 
Connecticut effective January 1, 1979. 

American Reinsurance Company, New York, New York, merged into American Rein- 
surance Company, a Delaware corporation effective January 1, 1979. 

J. C. Penney Insurance Company, Buena Park, California merged into J. C. Penney 
Life Company, Rutland, Vermont effective January 1, 1979. 

Globe Life & Accident Insurance Company, Oklahoma City, Oklahoma merged into 
Globe Life and Accident Insurance Company, Wilmington, Delaware effective 
December 31, 1979. 

The following companies withdrew from Massachusetts 

Michigan Millers Mutual Insurance Company, Lansing, Michigan voluntarily withdrew 
from Massachusetts effective September 24, 1979. 

Reserve Insurance Company was declared insolvent by order of the Circuit Court of 
Cook County, Illinois, effective May 29, 1979. 

American Reserve Insurance was declared insolvent by the Superior Court, State of 
Rhode Island, effective June 7, 1979. 

In 1979, the following name changes took place. 

The Hartford Life Insurance Company of Connecticut changed its name to Hartford 
Life Insurance Company effective January 1, 1979. 

Stuyvesant Insurance Company changed its name to Indemnity Insurance Company of 
North America, effective February 1, 1979. 

American Progressive Health Insurance Company of New York changed its name to 
American Progressive Life & Health Insurance Company of New York effective January 
25, 1979. 

International Life Insurance Company of Buffalo changed its name to International Life 
Insurance Company of New York effective May 1, 1979. 

Gamble Alden Life Insurance Company changed its name to John Alden Life Insurance 
Company, effective March 31, 1979. 

National Independence Insurance Company changed its name to Old General Insurance 
Company, effective May 1, 1979. 

Employers Mutual Liability Insurance Company of Wisconsin changed its name to 
Employers Insurance of Wausau A. Mutual Company, effective September 1, 1979. 

Transportation Mutual Insurance Company* converted to a stock company and changed 
its name to American Transportation Insurance Company, Inc. 



12 



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13 



LIFE INSURANCE COMPANIES EXAMINED IN 1979 



Companies Examined As Of 12/31/78 

Artistans Life Insurance 
Cooperative Society 

Assumption Mutual Life Insurance Co. 

Mass. General Life Insurance Co. 
(Merger of Loyal Protective) 

Paul Revere Life Insurance Co. 

Paul Revere Variable Annuity 

State Mutual Life Assurance Co. 

Total 

Examination In Progress 
As Of Year End 

United Educators Life Insurance Co. 



Assets 

$13,877,839 
22,479,535 

93,420,364 
690,025,344 
95,401,073 
2,024,792,828 
$2,939,996,983 



Liabilities 

$12,463,020 
21,281,194 

75,650,095 
606,858,133 
91,433,052 
1,937,400,496 
$2,745,085,990 



Capital 




$4,204,222 
9,800,000 
1,000,000 


$15,004,222 



Unassigned 
Surplus 

$1,414,819 


2,757,383 
67,153,358 
(5,463,399) 
66,948,62! 
$132,810,78( 



$2,596,197 $1,030,630 $400,000 ($604,433 




14 



PROPERTY AND CASUALTY INSURANCE COMPANIES EXAMINED IN 1979 



c ipanies Examined As Of 12/31/78 

^rchester Mutual Insurance Co. 

roveland Mutual Insurance Co. 

olyoke Mutual Insurance Co. 

[ass. Casualty Insurance Co. 

nited States Mutual Liability 
Insurance Co. 

lue Cross of Massachusetts 

lue Shield of Massachusetts 

Rental Service of Massachusetts 

Vest Newbury Mutual Fire 
Insurance Co. 

Norfolk and Dedham Mutual Fire 
Insurance Co. 

Total 

Examinations In Progress 
As Of Year End 

American Employers Insurance Co. 

Commercial Union Insurance Co. 

Employers Fire Insurance Co. 

Northern Assurance Co. 

\rkwright-Boston Manufacturers 
Mutual Insurance Co. 

\rkwright-Boston Insurance Co. 

Electric Insurance Co. 

Electric Mutual Liability 
Insurance Co. 

Total 



Assets 
$5,456,472 
49,078 
41,224,565 
43,358,941 

131,633 
381,252,110 
157,185,009 
3,983,952 

2,037,008 

37,861,792 
$672,540,560 



$308,271,233 
1,132,846,747 
124,142,488 
69,767,433 

579,618,512 
50,826,504 
25,598,144 



Liabilities 

$3,571,000 


26,236,553 
31,869,139 

51,261 
293,027,505 
111,636,188 
2,386,659 

1,453,167 

27,436,706 
$497,668,178 



$27,436,706 
912,379,673 
99,422,767 
55,922,481 

343,204,074 
37,363,265 
14,484,487 



Capital 





$1,357,500 








$1,357,500 



190,612,371 143,216,919 
$2,481,683,432 $1,633,430,372 



$2,000,000 
6,000,000 
2,000,000 
2,450,700 



2,000,000 
2,500,000 



$16,950,700 



Unassigned 
Surplus 

$1,705,472 
24,078 
14,911,912 
10,132,302 

80,372 
26,336,122 
26,740,593 
0* 

383,840 

10,425,086 
$90,739,777 



$33,321,015 
124,407,317 
10,142,721 
9,171,650 

233,206,075 
8,113,228 
2,593,237 

44,485,009 
$465,441,162 



Mai Reserve and Unassigned Funds — No Unassigned Funds Listed In A.S. 



15 



INSURANCE AGENCIES & BROKERS 
EXAMINED IN 1979 



Steven W. Young Insurance Agency — Newton 

Henry J. Leblanc Insurance Agency — Fitchburg 

Marsolais Insurance Agency — Ayer 

Peter T. Zaccone Insurance — Revere 

John Harriott Insurance Agency — Hanson 

John J. Hanan Insurance Agency — Lowell 

Rachelean Insurance Agency — Worcester 

Gaudette Insurance Agency — Grafton 

Mystic Valley Insurance Agency — Medford 

Buckley Insurance Agency — Worcester 

Jette Insurance Agency — Worcester 

Jos Mancuro Insurance Agency — Worcester 

Green & Bates Insurance Agency — Worcester 

Central Insurance Agency — Worcester 

Lynnford-Shmishkiss Insurance Agency — Lynn 

James H. Buckley Insurance Agency — Springfield 

Del Orndof Insurance Agency — Lynn 

United Financial Planners — Newton 

Champa Insurance Agency — Fitchburg 

Richard Bladgett Insurance Agency — Lynn 

Read & Shaw Insurance Agency — Pittsfield 

Chandler, Hoover and Giles Insurance Agency, Inc. 

Rome Insurance Agency — Fitchburg 

Walter Delany Insurance Agency — Dorchester 

Ely Kaplanski Insurance Agency — Brookline 

Ely Kaplanski Insurance Agency — Medford 

Ely Kaplanski Insurance Agency — Watertown 

Malmstead Insurance Agency — Worcester 

Woodcomb Insurance Agency — Fitchburg 

Baldwin Simon & Campbell Insurance Agency, Inc. — Springfield 

Knight-Dick Insurance Agency, Inc. — Worcester 

Calianos Insurance Agency — Roxbury 



16 



INSURANCE AGENCIES & BROKERS 
EXAMINED IN 1979 (continued) 



Calianos Insurance Agency — Dorchester 
St. Germaine Insurance Agency — Hyde Park 
Anthony Camarota D.B.A. John E. McDonald Ins. 

Agency — Springfield 
Alexander Pizzaconi Insurance Agency — Leominster 
P&D Insurance Agency — Leominster 
Reynolds, Barnes and Noble Ins. Agency, Inc. — Pittsfield 
Shea & Poor Insurance Agency, Inc. — Worcester 
Academy Insurance Agency, Fall River 
Wornat Insurance Agency, Worcester 
Purches Insurance Agency — Pittsfiled 
Palmer Goodell & Keeney Ins. Agency — Springfield 
H. J. Boule Ins. Agency, Inc. — Marlboro 
Normbro Insurance Agency — Marlboro 
Alexander Woolf Insurance Agency — Worcester 
Chatman, Whitman & Young Ins. Agency — Weymouth 
John Rogers & Son Insurance Agency — Stoughton 
Francis T. Crimmins Co. — Stoughton 
Berman Insurance Agency — Braintree 
Ralph Wilde Insurance Agency, Inc. — Randolph 
Baker Insurance Agency — Randolph 
A. E. Barnes Insurance Agency, Inc. — Weymouth 
Paul D. Manning Insurance Agency, Inc. — E. Douglas 
Avon Insurance Agency — Avon 
Dannely & Lydon Insurance Agency, Inc. — Norwood 
Paul Bissett Insurance — Stoughton 
Paul Flately Insurance — Braintree 
Kunevitch & Lau Insurance Agency — Brookline 
Kunevitch & Lau Insurance Agency — Allston 
Pembroke Insurance Agency, Inc. — Brockton 
James Miles Insurance Agency — Taunton 
Arthur Garry D.B.A. Financial Management Service Ins. 

Agency — Beverly 



17 



FRATERNAL ORGANIZATIONS EXAMINED IN 1979 



Lodges 

Catholic Assoc. of Foresters 

Supreme Council of the Royal 
Arcanum 

Total 

Societies Not On Lodge 
System (Section 45) 

Mutual Benefits Society of 
the Awakening Bisceglia Colony 
of Worcester, Inc. 

Chicopee Permanent Firefighters 
Benefit Assoc., Inc. 

Chicopee Police Mutual Aid Assoc. 

The Hudson Firefighters 
Relief Assoc. 

Independent City of Homes Assoc. 

The Knights of St. Stanislaus, Inc. 

Newton Firemens Relief Assoc. 

Newton Police Relief Assoc., Inc. 

Springfield Police Relief Assoc. 

Waltham Firefighters Welfare and 
Relief Assoc. 

Waltham Police Relief Assoc., Inc. 

Watertown, Firefighters Relief 
Assoc., Inc. 

Watertown Police Relief Assoc., Inc. 

Weston Police Relief Assoc. 

Westfield Firemens Mutual 
Relief Assoc. 

West Springfield Permanent 
Firemens Relief Assoc., Inc. 

West Springfield Police Relief Assoc. 

The Worcester Firemens Relief Assoc. 

Worcester Police Relief Assoc. 

Total 



Inc. 



Assets 
$9,559,262 

27,825,818 
$37,385,080 

Assets 

$76,100 

20,726 
101,467 

33,846 
157,237 

61,652 
115,285 
168,701 
3,204 

122,518 
302,621 

178,786 
215,419 
83,899 

59,671 

74,059 
64,739 
178,187 
462,399 
$2,480,516 



Liabilities 

$8,224,065 

19,882,834 
$28,106,898 



Unassigned 
Surplus 

$1,335,197 



7,942,984 
$9,278,181 



18 



RETIREMENT SYSTEMS EXAMINED IN 1979 



Retirement Systems 


Assets 


Surplus 


Adams 


CI T/£1 TTO 

$1,261,270 


$34,742 


Andover 


3,162,e4o 


65,194 


Atnoi 


1 t/Yi O70 
1,11)2,7/0 


T1 £10 

21,63o 


Attleboro 


A AQ 1 110 

4,001,1 lo 


OA A AO 

80,493 


Belmont 


5,015,706 


81,282 


Beverly 


< 701 07 1 
J, /7l ,0/1 


oc. cn 
75,512 


Braintree 


C TIT AQ 1 

6,232,081 


150,898 


Brockton 


1 A OCO CIO 

14,e5o,5l7 


*>*7 C A A"S 

215,442 


Chicopee 


O /1Q1 ££7 
7,471,00/ 


1 OO TTO 
107,227 


Clinton 


1 TOl iftl 

1,273,301 


15,610 


Dedham 


■3 1 OA 1 TO 


TT Cfl£ 

22,596 


Easthampton 


1 7A1 f\QA 

1 , /03 ,0o4 


CT "7*7 A 

52,770 


Fall River 


1/1 Ol/l AOT 
14,yi4,UV2 


TCC. 771 

205, / /3 


Gardner 


T /II ^ 7A1 
Z,41 j,Z01 


co7 
00, jo 1 


Gloucester 


/I £AO A10 

4,007,030 


CI 1 0T 
51,17/ 


Holyoke 


1 1 tia on 
1 1 ,23U,yj / 


TQA 1 OA 
200, 10U 


Lexington 


A 1 7£ TOT 
4, 1 /0, /7Z 


nc ato 
/0,027 


Lynn 


IS yllO /11Q 
10,41Z,437 


1C.O AOQ 
357,070 


Montague 


OAT 1Q7 

OUZ, 17/ 


Tl COO 
Z3, 0U7 


Quincy 


TA TA1 /IT A 

20, /01,4Z0 


/111 OC£ 

431,750 


Reading 


i oit one 


11/1 A/17 

1 10,04/ 


Swampscott 


T 70A /JTQ 

2, /70,42o 


/1 7 TA/I 

4/,Z04 


Taunton 


C O 1 /I 

6,5o3,Ol4 


1 7A 7QO 
1 /0, /07 


waKeneia 


/I TC.C. cno 
4,Zjj,j70 


1 Ofi 1 00 
1U0, ItU 


Walt nam 


11 1 Ol f\QA 

11,173,004 


T£1 Tl c. 

201,215 


Winchester 


1 O^Q 705. 
3,7j0, lyj 


OA 11 1 
"0,3 1 j 


Winthrop 


t iai nt 
Z,303,1Z5 


Tl Ol 1 
23,713 


Woburn 


4,465,66o 


ot co/; 
72,580 


Maynard 


768,400 


TC. 1AC. 

25,305 


Danvers 


< AAO 1 TO 

j,ouy,iZ7 


1/lfi 17fi 
1 40 , J / 


Marlboro 


1 ATI 100 
3,U/3,300 


AO 001 


New Bedford 


16,443,572 


461,322 


Peabody 


7,945,137 


172,531 


Shrewsbury 


2,542,775 


58,410 


Springfield 


25,027,881 


398,353 


C on n tips 

1 — \ t u 11 USB 






Franklin County 


T 077 TTO 

2,0 /Z,2/7 


03,j07 


rjnsioi county 


1/1 171 Q7Q 
14, 5 I j,y /y 


1 10 440 


iidxnpbnirc iwOuniy 


7 SO/> 000 
/ , JUO,U7U 


15*. 80? 




23 716 793 


557 067 


Turnpike Authority 


5,470,174 


211,701 


M.H.F. Agency 


605,854 


27,894 


TOTAL 


290,085,613 


$6,053,757 



19 



REVENUE/EXPENDITURES/EMPLOYEES 



The following is a 3 year comparison of the amount of revenue collected and monies expended by the Division c 
Insurance. An accounting of the average number of employees for the three year period is also included. 



Year 

1979 
1978 
1977 



Revenue 

7,131,152 
5,852,857 
3,867,331 



Expenditures 

3,712,000 
3,911,477 
3,783,307 



Employee Count 

193 
233 
240 



1979 _ SUMMARY OF MASSACHUSETTS 
DIRECT PREMIUMS AND NUMBER OF POLICIES 
ISSUED AND IN FORCE FOR THE MAJOR LINES OF LIFE INSURANCE 



Ordinary 

Credit Life (Gr. & Ind.) 

Group 

Industrial 

Total Life Insurance Including 
Annuity Considerations 



Direct Premiums 

649,578 
22,155 
200,203 
4,596 

1,078,859 



Policies Issued 

7,456,342 
985,816 
4,904,310 
10,984 

13,357,452 



Policies in Force 

37,931,459 
2,941,448 
36,557,279 
475,248 

77,905,434 



(000) omitted 



20 



1979 — SUMMARY OF MASSACHUSETTS 
ACCIDENT AND HEALTH INSURANCE EXPERIENCE 



Group 

Credit (Gr. & Ind.) 

Collectively 
Renewable 

Non-Cancellable 

Guaranteed 
Renewable 

All Other 

Total 

(000) omitted 



Direct 
Premiums 
Written 

468,464 
5,928 

11,077 
31,977 

26,136 
24,105 
567,687 



Direct 
Premiums 
Earned 

477,569 
5,085 

10,919 
30,184 

26,272 
24,302 
574,331 



Direct 
Losses 
Paid 



Direct 
Losses 
Incurred 



387,407 403,637 

3,050 3,352 

6,511 8,012 

14,430 20,178 

15,150 15,496 

14,180 14,606 

440,728 465,280 



W/P 
Loss Ratio 

82.7 
51.5 

58.8 
45.1 

58.0 
58.8 
77.6 



E/I 
Loss Ratio 

84.5 
65.9 

73.4 
66.9 

59.0 
60.1 
81.0 



21 



1979 — SUMMARY OF MASSACHUSETTS 
MAJOR PROPERTY AND CASUALTY COVERAGES 





Premiums 
Written 


Premiums 
Earned 


Losses 

Paid 


f ,OSSPS 

Incurred 


W/P 
Loss Ratio 


E/I 
Loss Ra 


Fire 


77,834 


80,023 


33,066 


31,359 


42.5 


39.2 


Allied Lines 


22,158 


22,136 


7,922 


7,027 


35.8 


31.7 


Home Owners 


333,074 


312,259 


135,126 


143,234 


40.5 


45.9 


Commercial 
Multi-Peril 


222,176 


212,258 


65,744 


86,939 


29.6 


41.0 


Inland 
Marine 


53,935 


51,085 


21,159 


26,083 


39.2 


51.1 


Workers 

Compensation 
Auto No Fault 

(Private Passengers) 


367,392 
37,984 


359,187 
36,042 


224,888 
23,627 


311,198 
22,482 


61.2 
62.2 


86.6 
62.4 


Auto No Fault 
(Commercial) 


3,721 


3,564 


1,831 


1,182 


49.2 


33.2 


Auto Liability 
(Private Passengers) 


407,020 


385,831 


261,004 


297,341 


64.1 


77.1 


Auto Liability 
(Commercial) 


105,754 


103,401 


60,438 


76,430 


57.1 


73.9 


Auto Physical Damage 
(Private Passengers) 


374,402 


360,323 


247,406 


256,871 


66.1 


71.3 


Auto Physical Damage 
(Commercial) 


77,382 


73,830 


42,620 


42,886 


55.1 


58.1 


Other Liability 


190,432 


189,082 


54,189 


101,075 


28.5 


53.5 



(000) Omitted 



22 



1980 

ANNUAL 
REPORT 
DIVISION of 
INSURANCE 

State Library of Massachusetts 
State House, Boston 02133 



J Publication #13,098-200-36-2-83-CR 

Approved by John J. Manton, State Purchasing Agent 



In accordance with the provisions of M.G.L. Chapter 175, Section 17, 
the Division of Insurance is pleased to report to the Governor and to the 
Great and General Court of the Commonwealth the following transactions for 
the year 1980. 



Michael J. Sabbagh 
Commissioner of Insurance 



TABLE OF CONTENTS 

page 

Highlights i 

Sectional Summary 

Administrative Section 3 

Consumer Service Section 3 

Financial Surveillance Section 4 

Legal Section 5 

Licensing and Examinations Section 5 

Agents and Brokers 5 

Educational Testing Service 6 

Motor Vehicle Damage Appraisers 6 

Agencies Examined 6 

Life Insurance Companies Examined 8 

Property and Casualty Insurance Companies Examined... 9 

Domestic Insurance Companies Which Increased 

Paid Up Capital 11 

Fraternal Organizations Examined 12 

Retirement Systems Examined 13 

Special Investigation Section 15 

State Rating Bureau 16 

Policy Forms Section 19 

Laws, Regulations and Decisions 

Laws 21 

Regulations 22 

Decisions 22 

Schedule of Companies in Receivership 26 

Company Activity 27 

Property and Casualty Companies Licensed 28 

Life Insurance Companies Licensed 29 

Title Insurance Company Licensed 30 

Surplus Lines Companies Approved 30 

* Reinsurers - "b" Approved^ 30 

Combination - Surplus Lines and Reinsurer s^b" Approved 31 

Health Maintenance Organization (H.M.O.'s) Licensed 31 

Optometric Service Corporation Licensed 31 

Companies With Approved Legal Service Plans 31 

Companies Which Changed Names 32 

Companies No Longer Licensed... 33 

Mergers 33 

Re domestication. 33 

Massachusetts Direct Premiums and Number of Policies Issued 

and In Force for the Major Lines of Life Insurance 34 

Massachusetts Accident and Health Insurance Experience 35 

Massachusetts Major Property and Casualty Coverages 36 



HIGHLIGHTS 

The following items made a significant impact upon insurance interests 
in the Commonwealth for the year. 

I. Revisions to the Plan of Operation for the Massachusetts Property 
Insurance Underwriting Association (Fair Plan) 

The Commissioner approved some suggested revisions to the Plan 

of Operation of the Fair Plan in order to provide for additional 

controls and better deal with both the arson and the moral hazard 

problems at the Plan. The approval affected Section X, subsection (3); 

Section XIA, subsection (1); Section XII, subsection (1-11 and 13); 

and Section XIII of the Plan of Operation. 

II. Rules and Regulations Governing Life Insurance Solicitation 

Life insurance companies doing business in Massachusetts are now 

required to disclose the cost of their policies; provide buyers' 

guides which will tell the consumer in easy-to-understand language 

how to use the cost disclosure information; and that the disclosure 

must take place prior to the consumer's decision to buy, 

III. Regulation 211 CMR 75.00 - Procedure for Reporting the Theft of a 
Motor Vehicle 

In light of the severe economic and social impact of auto theft 

on the Commonwealth's residents, we have implemented new procedures, 

as authorized by Chapter 451 of the Acts of 1980, for the reporting 

of auto theft claims. These new procedures, which were based upon 

recommendations of the Governor's Task Force on Auto Theft, should 

have a significant impact on the reduction of fraudulent auto theft 

claims. 



IV. Public Transit Discount 

Policyholders who regularly use approved public transportation 
instead of their own vehicles for commuting to work or school can 
now receive a 10% discount on their Property Damage and Collision 
premiums. 

V. Buyers' Guides 

We have developed an additional consumer publication which added 
to our prior publications. The new guide entitled "Insuring Your 
Home" A Consumer Guide for Owners and Renters" provides information 
as to the coverages, limits, and types of homeowners' policies 
available in today's market. It also suggests some ways to save 
money on your homeowners' insurance. 



SECTIONAL SUMMARY 



THE ADMINISTRATION SECTION 

For the year ending December 31, 1980, the Division of Insurance 
reports the following statistical data for this state: 

Total Revenue from 

Licensed Companies Premium Volume Premium Taxes & Fees Collected 

708 $'4, 450, 500,000 $121,367,976 

The Administration Section is responsible for payroll, personnel, 
revenue receipt, budget, accounting, EDP programming, equipment, supplies, 
purchasing, and other miscellaneous duties. 

For the most recent four year period the Division has collected 
and expended revenue as follows: 

Year Revenue 

1980 $7,863,697 

1979 7,131,152 

1978 5,852,857 

1977 3,867,331 
THE CONSUMER SERVICE SECTION 

The Consumer Service Section is responsible for the resolution of 
cases brought to the attention of the Division of Insurance by the general 
public. The Consumer Service Section acts as a conduit between the consumer 
and his or her insurer when information concerning a policy or a claim is 
not forthcoming or a claimant is not sufficiently informed of the reasons 
for the insurer's position. The following is a statistical summary of the 
Consumer Service caseload. 



Expenditures Employee Count 
$3,697,675 185 
3,712,000 193 
3,911,477 233 
3,783,307 240 



STATISTICAL DATA 



SPRINGFIELD AND BOSTON COMBINED 



Total Cases 
Handled 



Miscellaneous and 
Information Requests 



9,447 



1,727 



Recovery 



Closed Cases 



$1,584,556 



7,750 



THE FINANCIAL SURVEILLANCE SECTION 

The Financial Surveillance Section reviewed the annual statements 
of over 700 companies which are licensed or admitted to transact business 
in the Commonwealth. During 1980, 55 companies were monitored by this section 
on a quarterly basis and seven companies monitored on a monthly basis. Reviews 
and monitoring of quarterly reports submitted by the 17 Health Maintenance 
Organizations (H.M.O. 's) licensed by this Division, was also an ongoing 
duty of the section. 

In addition, this section reviewed all applications filed by insurance 
companies, H.M.O. 's, legal service plans and optometric service corporations. 
The applications of 38 insurance companies and 5 H.M.O. 's were approved 
by the Commissioner and admitted to transact business in Massachusetts. 
The application of the first optometric service corporation has been approved 
and will be the first such corporation admitted to transact business in 
Massachusetts under Massachusetts General Law, Chapter 176F. 

In order to professionalize the section and to increase its efficiency, 
three members were assigned to attend classes in computer executive language. 
Each of these employees attended a total of five classes. These examiners 
are now able to utilize the Division's computer terminal and extract information 
from the N.A.I.C. data base. 



THE LEGAL SECTION 

During 1980, the Legal Section acted as prosecutor in 27 administrative 
actions against companies, agents, brokers, and motor vehicle damage appraisers. 
These actions sought the suspension or revocation of licenses and the imposition 
of monetary penalties. The attorneys also represented the Division at 
other types of administrative hearings. 

The Legal Section referred 12 civil and criminal cases to county, 
state, and federal law enforcement agencies and assisted in their preparation. 
Further, the Legal Section aided the Office of the Attorney General on 18 
court cases in which the Commissioner of Insurance was a defendant. 

In addition, a substantial portion of the Legal Section's time was 
devoted to serving the legal needs of other sections within the Division. 
Services typically included assisting the Consumer Service Staff and advising 
the Financial Surveillance, Policy Approval, Retirement Systems, and Agents 
and Brokers staffs. Numerous inquiries from insurance companies, agents 
and brokers, the public, and governmental agencies were answered. 
LICENSING AND EXAMINATIONS SECTION 

Agents and Brokers - In accordance with all statutory licensing requirements, 
the licensing section reports: 

During 1980, a total of 24,324 new applications and licenses were 
processed and issued. During this time 78,669 agents renewed their licenses 
while 7,548 agents were cancelled. 

A total of 166 new fraternal licenses were issued and an estimated 
5,000 applications were returned for corrections. 

The following statistics represent the output on brokers licenses 
for the year 1980. 



-5- 



Individual and trade names-renewed 
and new licenses issued 

Corporation licenses renewed 

Special Brokers licenses-renewed 
and new licenses issued 

Partnerships-renewed or new issue 

Insurance Advisors-renewed or new issue 

Fire Loss Adjusters-renewed or new issue 



18,390 

1,726 
301 

285 
310 
110 

TOTAL 21,122 



Educational Testing Service 



Type of Exam 
Life 

Accident & Health 
Property 
Ca sualty 



# Taken 

2675 
3209 
1588 
1778 
TOTAL 9250 



# Passed 

1974 
1449 

995 

927 



># Failed 

701 
1760 
593 
851 



5345 



3905 



% Passed 

73.7 
45.1 
62.6 
52.1 
57.7 



Motor Vehicle Damage Appraisers 

At the present time there are approximately seven thousand licensed 
Motor Vehicle Damage Appraisers. This figure remains relatively stable, 
as the new licenses issued are about the same number as the cancellations 
Examinations 

The following examinations of Insurance Agencies, Life and Casualty 
Companies, Fraternal Organizations and Retirement Systems are reported as 
being completed during the year. 



Agencies Examined 

Doody Insurance 
Randolph, MA 

Wayne Miller 

d/b/a/ Independence Insurance 

Peter Briggs vs. John Scrocca 
New Bedford, MA 



Celia & Celia Insurance Agcy. 
Brockton, MA 

Fredericks & Gerardi Insurance Agcy., Inc 
Brockton, MA 

McCormick & Sons Insurance Agcy. 
Avon , MA 



-6- 



Gerard Mazzola Insurance 
Natick, MA 

Manuel Domingo s 
Brockton, MA 

VIP Insurance 
Chestnut Hill, MA 

Smith, Buckley & Hunt, Inc. 
Brockton, MA 

Richard E. Sharycz 
Brockton, MA 

Burgin Platner Ins. Agcy. , Inc. 
Quincy, MA 

Frank R. Carchidi Ins. Agcy., Inc. 
Brockton, MA 

Thompson, Eaton & Boy den Ins. Agcy, 
Brockton, MA 

Steward Earl Ins. Agcy. 
Brockton, MA 

W.L. Churchill Ins. Agcy. 
Brockton, MA 

Randolph Ins. Agcy., Inc. 
Randolph, MA 

A.E. Barnes 
Weymouth, MA 

Metro Insurance 
Jamaica Plain 

Richard Vlontis 
Wellesley, MA 

Frank Bruce 
(Complaint by Mutual 
of Omaha) 

Riley & Rielly Insurance 
Quincy, MA 

Charles A. Flynn 
Quincy, MA 

Freedman Ins. Agcy. 
Randolph 

Mot tar d Ins. Agcy 
Dorchester, MA 



Paul T. D'Attilio 
De dham , MA 

A.L. Cushman & Sons 
Brockton, MA 

Roger Keith & Sons 
Brockton, MA 

George Brady Insurance Agcy 
Brockton, MA 

Raymond W. Porter Insurance Agcy. 
Brockton, MA 

Oster Insurance Agcy 
Cambridge, MA 

Francis Gordon Insurance Agcy. 
Holbrook, MA 

Twinbrook Insurance Agcy., Inc. 
Holbrook, MA 

Joseph F. Ansacoi 
Quincy, MA 

Frederick M. George Insurance Agcy., Inc. 
Holbrook, MA 

Cambell & Wood 
Dorchester, MA 

Paul Lymneos 
Roslindale, MA 

Charles Powers & Sons 
Randolph, MA 

P.S. Dolan 
Brockton, MA 

Nicholas Boufides Ins. Agency 
Brockton, MA 



Raymond McCormack 
Brockton, MA 

Citadel Insurance Agcy. 
Randolph, MA 

Robert F. Brown Ins. Agcy 
Dedham 



-7- 



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-10- 



An increase in the paid-up capital for the following domestic companies 
was approved as indicated. 

FROM TO EFFECTIVE 

American Policyholders' 

Insurance Company $ 1,575,000 $2,550,000 12-19-80 

Massachusetts Plate Glass 

Insurance Company $ 502,598 $1,000,000 12-31-80 



Employers Fire Insurance 

Company $ 2,000,000 $2,500,000 12-30-80 



American Employers 

Insurance Company $ 2000,000 $2,500,000 12-30-80 



-11- 



FRATERU AL ORGANIZATIONS EXAMINED 



LODGES 



ASSETS 



LIABILITIES 



UN ASSIGNED 
SURPLUS 



Portuguese Continental Union of $2,UUO,2li8 $1,916,872 
the U. S. A. 



$223,376 



SOCIETIES NOT ON LODGE 
SYSTEM (SECTION U5) 

Boston Firemen's Relief Assn. 

Weston Police Relief Assn. 

Beverly Firemen's Relief Assn. 

Bachrach Associates Mat. Ben. Assn. 

Salem Police Relief Assn. 

Woburn Police Relief Assn. 

Methuen Police Relief Assn. 

U.S. Postal Inspection Service 
Mut. Ben. Assn. 

Water town Police Relief Assn. 

Cohasset Police Relief Assn. 



ASSETS 
$U73,828.08 
°6,31ii.76 
67,958.78 
2k,7Ih.hO 

178,06U.56 

122,U50.Ui 
78,8U8.36 

367,635.1*3 

231,562.72 
U8,10l4.60 



In progress year ending 1979s 

The Relief Assn. of the Peabody Fire Dept. $100,396.52 



-12- 



RETIREMENT SYSTEMS EXAMINED 



RETIREMENT SYSTEMS 


ASSETS 


SURPLUS 


BROOKLINE 


"s 1 4 

4> X H 


7 1 n 

> / x u 


AOX 
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CAMBRIDGE 


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6 10 


2 2 6 


ad q 


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CONCORD 


X 

mi 


5 2 3 

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8 7 3 


12^ 

X i. D 


7 1 A 
i / ID 


ESSEX COUNTY 


1 8 


681 

1 U U i. 


9 2 4 


5 5^ 
J J J 


4(1 s 
, f U J 


EVERETT 


7 

/ 


749 


1 73 


1 69 


1 f\0 
, X o u 


FITCHBURG 


7 

/ 


04 7 

i VJ *T / 


1 36 

1 X J U 




■^1 ^ 


FRAMINGHAM 


1 

X VJ 


1 96 


410 

i ^ JL VJ 


7 8 8 
coo 


(1^9 

, VI J J 


GREENFIELD 


2 


340 


010 


6(1 


^ 1 Q 


H INGHAM 




86 ? 
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4 ^ 

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9(1 


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LEOMINSTER 


4 


466 
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1 76 

X L O 


7 71 

, L L X 


MALDEN 


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399 

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2 9 4 

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717 


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MARBLEHEAD 


Q, 


30 


69 8 

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MASS. PORT AUTHORITY 


8 

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1 9 3 


5 8 

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(164 


MEDFORD 


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869 

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61 7 

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2^6 


9 (1 1 


MIDDLESEX COUNTY 


50 

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7 5 7 


7 31 


1 5 28 


1 81 

1 X O X 


METHUEN 


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664 

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394 • 

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76 

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NEWTON 


38 

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900 


091 

VJ .7 JL 


1 19 7 


4 6 5 

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NORFOLK COUNTY 


78 


7 3 3 

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74 

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620 

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1 *t *J VJ 


NORTH ADAMS 


2 


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209 

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806 

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1 

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116 

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41 


609 


PLYMOUTH 


A 


L O O ] 


Q ? 7 

Z* L> i 


1 79 


1 9 

VJ J. «7 


PLYMOUTH COUNTY (In Progress) 


76 


9 9 R 


6 74 

VJ / "T 


79 7 

' i Zf 1 


918 


SALEM 


8 , 


890 , 


408 


; 199. 


807 


SHREWSBURY 


2 , 


915, 


847 


104 , 


716 


SOMERVILLE 


13, 


459 , 


851 ' ,: 


... 211, 


547 



-13- 



RETIREMENT SYSTEMS EXAMINED 



RETIREMENT SYSTEMS 

SOUTHBRIDGE 

STATE TEACHERS* 

TAUNTON 

WATERTOWN 

WEBSTER 

WELLESLEY 

WESTFIELD 

WEST SPRINGFIELD 

WEYMOUTH 

WORCESTER 

BERKSHIRE COUNTY 

CHELSEA 

NATICK (Special) 

CHICOPEE(Special) 

STATE RETIREMENT ( IN PROGRESS) 

FALMOUTH (Special) * 

TOTAL 

* Annual Statements have not 
Insurance . 



ASSETS SURPLUS 
$1,753,749 $66,947 
ANNUAL STATEMENTS NOT AVAILABLE 



7,808,408 


208 , 887 


7,772,332 


139 , 715 


1 , 293 ,046 


26,917 


6,465,902 


221 ,670 


5,874,982 


215, 944 


4,601,933 


90,965 


8,833,378 


246 , 595 


70 TOT 17*7 

jo , ZZZ , lo / 


1 , / o , U 1 3 


5 , 346, 756 


170 , 799 


7,025,809 


155,448 


5,451, 373 


111,692 


11, 142 , 813 


259,213 


701 ,918 , 253 


17,040,930 



ANNUAL STATEMENT NOT AVAILABLE 



$1,133,844,437 $28, 750 ,404 
been filed with the Division of 



-14- 



THE SPECIAL INVESTIGATION SECTION 

The Special Investigation Section conducts special investigations 
as ordered by the Commissioner. The section investigates violations of 
insurance laws reported by the public. Collected evidence is referred to 
the Legal Section for administrative enforcement actions and to criminal 
authorities for prosecution. 

As a result of the effort of this unit during the year, Massachusetts 
residents were rewarded by refunds in excess of $58,000, not including 
restitution made by agents and brokers in excess of $2,500. Some $4,000 
in criminal penalties was paid to the Commonwealth and a number of licenses 
revoked as a result of prosecution by the Division. Refunds and restitution 
effected by this section are in addition to recoveries reported by the Consumer 
Service Section. 

Hundreds of elderly consumers were assisted in the identification 
of the type and amounts in their insurance portfolio . In cases where unfair 
or deceitful practices were discovered and duplication or inferior replacement 
coverages disclosed, the consumers were assisted in obtaining refunds from 
the companies or restitution from the agents or reinstatement of original 
coverages and refunds of premiums paid for inferior insurance replacements. 

At the request of the Governor, the Commissioner, through this unit, 
developed and documented information and evidence about the roles played 
by motor vehicle damage appraisers, "chop-shops" and salvage yards in the 
automobile theft problem and related insurance fraud. The developed information 
served as guidelines for the Governor's Task Force on Auto Theft and culminated 
in enacting laws which encourage cooperation among insurance companies, 
law enforcement agencies, and insurance regulators in curtailing the theft 
or misappropriation of motor vehicles. As a consequence of these enactments, 
the Insurance Division promulgated Regulation 211 CMR 75.00. 



-15- 



THE STATE RATING BUREAU - (SRB) 

The SRB was established by Chapter 728, Acts of 1975 and is responsible 
to the Commissioner of Insurance for rate recommendations for automobile 
insurance and for homeowner coverage, and for such other rate reviews as 
the Commissioner assigns. 

The Bureau is divided into various sections made up principally of 
actuaries and analysists for Life, Accident and Health, Property, Casualty 
and Inland Marine Insurance. 

During 1980, the SRB participated in or assisted the Commissioner 
and the other sections of the Division in the following areas of concern: 

1. Automobile Rates for 1981 - The SRB prepared a filing for 1981 rates 
which proposed an increase substantially below that which was proposed by 

the industry. The preparation of this filing was a major effort involving 
in-depth research with regard to every facet of the ratemaking process. 
Also involved was a thorough analysis of the industry filing, a technical 
document of over 600 pages. The SRB defended its filing during the rate 
hearing process which lasted several weeks. During the hearings, members 
of the SRB gave extensive testimony as expert witnesses regarding the various 
filings. Automobile insurance will generate premiums of over one billion 
dollars in 1981. 

2. Medical Malpractice - The SRB has been involved in the annual 
process which results in the establishment of madical Malpractice rates. 

3. Task Force on Statutory Reform - The SRB has participated in 

a Task Force which has been investigating possibilities for automobile insurance 
legislative reform. This includes consideration of the legislative packages 
which have already been submitted to the legislature. 



-16- 



4. Workers' Compensation Revisions - A general rate revision in 
workers' Compensation rates was reviewed. There is over $300 million of 
Workers' Compensation insurance premium. The filing included a new allocation 
of expenses by size of insured and the use of unlimited payroll as an exposure 
base. Also there were new tables to evaluate the expected cost of life 
annuity benefits, as well as new Retrospective Workers' Compensation rates. 

5. Blue Cross/Blue Shield - Public hearings were held on rate increase 
requests of Blue Cross and Blue Shield (The Blues) for Medex and non-group 
plans. With respect to Medex the original request of the Blues was not 
opposed. However the request of the Blues with respect to non-group contracts 
was opposed and as a result the Blues scaled down their request for an in- 
crease in Blue Shield rates from 16.2% to 11.6%, a saving of $540,000 and 

for Blue Cross from 2.4% to 0%, a saving of $965,000 to subscribers. 

Blue Cross, Blue Shield and Dental Service Corporation make numerous 
requests for approval of new plans, riders and benefits, or amendments to 
existing plans, etc. and changes in benefit schedules. 

6. Licensing of New Health Maintenance Organizations - The applications 
of 7 H.M.O. 's were reviewed for reasonableness of projections, utilization 
plan, evidence of coverage, actuarial assumptions underlying premium rates 

and readability tests of which 5 were ultimately licensed. 

7. Guidelines for Approval of Flexible Premium Life Insurance Policies - 
In recent years insurers have been issuing non-participating policies. Under such 
policies the insurer reserves the right to charge certain maximum premium but may 
charge a lower premium.* the reduction being dependent on anticipated favorable investment 



-17- 



experience (and in some cases favorable mortality experience). The guidelines 
require the insurer to disclose the actuarial assumptions made in computing 
reductions. 

8. Computer Program Created to Compute Legal Minimum Cash Values - 
The number of policy forms submitted by insurance companies for approval 
has increased. The policies also have become more complex, with premiums, 
benefits and interest assumptions for computing cash values varying by duration. 
The computer program enables users to get legal minimum cash values without 
relying on data supplied by the insurance companies. 

9. Assist Consumer Services Section with Complaints Against Insurers - 
Conflicts between insurers and consumers were resolved by accessing the 
Bureau's expertise. 

10. Participated in Industry Statistical Committee - Presented Division 
viewpoints related to the handling of statistical gathering and compilation 

on an ongoing basis. 

11. Profitability Data - The SRB worked with industry representatives 
in establishing data requirements which will allow more meaningful evaluation 
of industry profitability in the future. 

12. Study of Industry Facility Ceding Practices - Investigated company 
Facility cession patterns to determine companies which were ceding excessively. 

13. Developed Access to NAIC Data Base - We are now able to access 
by computer a wide range of industry financial data compiled by the NAIC. 

14. Implementation of Open Competition for Commercial Automobile - 
Members of the SRB have represented the Commissioner on his Advisory Committee 
on Open Competition for Commercial Automobile Insurance. The SRB and the 
representatives of the insurance industry are working together to ensure 

a smooth inception on July 1, 1981, of competitive rates for commercial 
automobile insurance. 

-18- 



Research Projects 

During 1980 a number of research projects were undertaken and a number 
of new ideas put forward. 

The SRB continued to refine the State's unique experience based terri- 
torial system. Each town is assigned an automobile rate territory based 
on its actual history of accidents, rather than merely where it is geographically 
located in the state. 

Those Workers' Compensation classes, covered by the federal laws, 
can receive lifetime benefits whose amount increases along with the cost 
of living. The SRB devised a new method of considering them in the making 
of F-Class rates. 

The SRB recommended that discounts be given on automobile Insurance 
premiums, to those drivers who drive substantially fewer miles than average. 

The SRB recommended a fairer allocation of expenses between different 
insureds on the collision and Comprehensive coverages. 

The SRB began a continuing study of data provided by the Merit Rating 
Board and the Registry of Motor Vehicles. The objective is to determine 
actuarially how automobile insurance rates might vary based on an insured's 
Individual history of accidents and/or convictions for traffic violations. 

POLICY FORMS SECTION 

The Policy Forms section reviewed over 1,400 forms and over 3,000 
rate filings in the property and casualty insurance area. 

Also 1,800 individual accident and health forms were approved, while 
650 were disapproved. Three hundred group health forms were examined, while 
35 were criticized. In addition, 800 accident and health rate filings 
were accepted, while 200 were disapproved. 



-19- 



Two thousand two hundred individual life and annuity forms were approved, 
while 1600 were disapproved. Five hundred group life and annuity forms 
were reviewed, while 12 were found unacceptable. 

The Life Actuarial Section is responsible for the actuarial examination 
of individual life and annuity forms submitted for approval and issuance 
in the Commonwealth of Massachusetts by seventeen domestic and two hundred 
seventy-eight foreign life insurance companies. It ensures that the benefits 
not only meet the minimum requirements of our General Laws, but that they 
are calculated in accordance with the method, interest rate assumptions, 
and mortality tables, as specified in the policy. Often this requires extensive 
correspondence and communication with insurance company representatives. 

It approved an anticipated low-cost flexible premium life product 
which allows an insurer to prospectively reduce premiums below the "maximum 
guaranteed premium" based upon current expectations of future experience. 

In addition to variable life plans where benefits are based on the 
investment experience of a separate account, we approved adjustable life. 
This product is intended to cover a person's insurance needs through his 
or her lifetime. The coverage may be adjusted upward or downward as insurance 
needs and capabilities dictate. 

One major project was the approval of the guaranteed 
interest assumptions in pre-1978 permanent policies of one major company 
and, as a result, the face amount death benefit increased an average of 
15% per policy. This will result in approximately $79 million of increased 
coverage for Massachusetts policyholders. 



-20- 



LAWS 



In 1980 The General Court passed, and the Governor approved the following 
Acts of Insurance-related legislation. The number identifying each Act is the 
chapter number assigned to it during the 1980 session of the General Court. 

Chap. 59, providing for the issuance of a so-called binder of insurance. 

Chap. 87, clarifying the law regulating insurance contracts against 
losses by fire. 

Chap. 104, changing the inception time of all standard fire insurance 
contracts. 

Chap. 121, providing for increased cooperation between insurance companies 
insurance agents and law enforcement agencies in the investigation of losses 
by f ire . 

Chap. 125, regulating the form of contract for the adjustment or appraisal 
of a fire loss. 

Chap. 130, relative to certain abandoned property. 

Chap. 196, relative to the operation of health maintenance organizations. 

Chap. 212, further regulating payment by health service corporations 
of claims due to estates of deceased subscribers. 

Chap. 255, relative to applications for fire insurance on certain 
buildings. 

Chap. 260, prohibiting insurance companies from reducing certain personal 
injury protection benefits. 

Chap. 329, sees. 64-67, relating to the contributory retirement systems 
and pensions. 

Chap. 333, further regulating the method of assessment of a deficit 
of the medical malpractice joint underwriting association. 

Chap. 386, further regulating the sale of certain insurance policies. 

Chap. 392, increasing the contribution of insurance companies for certain 
costs of fire protection. 

Chap. 398, further defining independent licensed insurance agents to 
whom certain premiums are to be paid by certain insurers. 

Chap. 451, providing for increased cooperation between insurance companies 
and law enforcement agencies in the investigation of losses due to the theft 
or misappropriation of a motor vehicle. 



-21- 



Chap. 463, facilitating the investigation and prosecution of the theft 
of motor vehicles and of fraudulent motor vehicles insurance claims. 

Chap. 532, relative to uninsured and under insured motor vehicle coverage. 

Chap. 558, further regulating the sale of medicare supplemental insurance 
policies sold in the Commonwealth. 

Chap. 572, authorizing the commissioner of administration to set fees 
and charges paid to the Commonwealth. 



REGULATIONS 

To complement the laws governing insurance, the Division of Insurance 
used its statutory authority to issue regulations. The regulations adopted 
or amended in 1980 are shown below, in the order in which they were issued. 

"CMR" refers to the Code of Massachusetts Regulations, which is published 
by the Massachusetts Secretary of State. 

211 CMR 79.00, Standard Merit Rating Plan (originally adopted as an 
emergency regulation in 1979; made permanent in 1980). 

211 CMR 2.00, Schedule of Minimum Payments (which an insurance company 
must require on the principal of certain mortgage loans). 

211 CMR 31.00, Life Insurance Solicitation. 

211 CMR 75.00, Procedures for Reporting the Theft of a Motor Vehicle 
(first adopted as emergency regulation; then made permanent). 

211 CMR 100.00, Disability Retirement Allowances (adopted as an emergency 
regulation) . 



DECISIONS 

Statutes also give the Insurance Commissioner the power to hold hearings 
over a wide variety of insurance matters. The decisions rendered in 1980 
are shown below in chronological order: 

Supplement to Opinion, Findings and Decision on 1979 automobile in- 
surance rates. 

Appeal, Decision and Order concerning proposed Rule 18 of the Rules of 
Operation of the Massachusetts Motor Vehicle Reinsurance Facility. 

Dismissal of Vincent DiCicco's appeal from a decision of the Massachusetts 
Motor Vehicle Reinsurance Facility. 



-22- 



Opinion, Findings, and Decision relative to the filing of Blue Cross 
of Massachusetts, Inc. and Blue Shield of Massachusetts, Inc. for an increase 
in Medex rates to be effective April 1, 1980. 

Decisions concerning applications for automobile rate deviations. 

Findings and Conclusions concerning the appeal of Tekoa Country Club, 
Inc., from a decision of Insurance Services Office of Massachusetts. 



Decision on the appeal of Herbert Willensky from a decision of the 
Massachusetts Motor Vehicle Reinsurance Facility. 

Decision on medical malpractice insurance rates for 1980. 

Findings and Conclusions resulting from a hearing on Facility Rule 19A 
proposed for use during 1980. 

Report of the determination of the Commissioner of Insurance relative to 
the operation of competition among motor vehicle insurers pursuant to M.G.L. 
chapter 175E, section 5. 

Opinion, Finding and Decision concerning rules and regulations governing 
life insurance solicitation. 

Opinion, Finding and Decision regarding the establishing of territorial 
boundaries to be used in rate making for automobile insurance. 

Dismissal of the appeal of Domlnick M. Cirino, d/b/a Thomas Insurance 
Agency, from a decision of the Massachusetts Motor Vehicle Reinsurance Facility. 

Dismissal of the appeal of Fred J. Nahil, M.D. , Clarence C. La Fortune, M.D., 
and Patricia B. Weeks, M.D. from a decision of Blue Shield of Massachusetts, 
Inc. 



-23- 



Decision and Order on Appeal regarding an Opinion, Fnding, and Decision, 
dated November 30, 1979, approving the proposed nongroup rates filed by 
Blue Cross of Massachusetts, Inc., and Blue Shield of Massachusetts, Inc. 

Findings and Decision in the matter of acquisition of control of 
Massachusetts Casualty Insurance Company by Equitable Massachusetts, Inc., 
a wholly-owned subsidiary of Equitable of Iowa Companies. 

Decision and Order concerning application of Blue Cross of Massachusetts, 
Inc., and Blue Shield of Massachusetts, Inc., for approval of proposed quarterly 
non-group rates. 

Findings and Order concerning the appeal of Teodore A. Calianos from 
a decision of the Massachusetts Motor Vehicle Reinsurance Facility. 

Remand Decision on 1980 automobile insurance rates. 

Appeal Decision concerning the appeal of Theodore A. Calianos from 
a decision of the Massachusetts Motor Vehicle Reinsurance Facility. 

Opinion, Findings and Decision on 1981 automobile insurance rates. 

Findings and Decision in the matter of acquisition of control of 
United Educators Inc. by U E Holding Corp. 

The Division also issued decisions or agreed to consent orders in 
cases involving alleged misconduct by agents, brokers, and motor vehicle 
damage appraisers. The cases closed out in 1980 are shown below, in alphabetical 
order with Docket Number. 

1. Amero, David R. and Amero, David R. , d/b/a The Salvatore J. Favazza 
Ins. Agency, Inc. E80-3-2 

2. Anderson, Arthur W. E90-7-1 

3. Bainer, Richard out of business 

4. Baker, Jr., Phillips E80-11-1 



-24- 



5. Becker, Gilbert E81-1-8 

6. Blakely, R. Whitcomb E80-12-1 

7. Burhoe, William out of business 

8. Chesley, Robert L. E80-5-4 

9. Cooper, Brian L. E81-5-2 

10. Creese, William E. and William E. Creese Ins. Agency, Inc. E78-3-3 

11. Cross, Jr., Frederick R. and Cross, Frederick R. d/b/a Mass. Tenants 
and Home Owners Ins. Agency E80-6-1 

12. Gage, Bruce E81-2-.3 

13. Gonsalves, Mary E. (Martins) E80-5-5 

14. Handy, Raymond out of business 

15. Kay, John out of business 

16. Keller, Richard H. E80-4-3 

17. Kohut, Robert E79-10-3 

18. Larter, Richard A. E80-5-2 

19. Mackey, Phillip F. and Mackey, Joyce V., Lighthouse Ins. Agency, Inc. 

E80-1-2 

20. Marquis, Charles T., Charles T. Marquis Ins. Agency Inc. E80-5-4 

r 

21. Marquis, Lawrence E79-2-2 

22. Miller, Wayne R., d/b/a Independence Insurance Agency E80-2-2 

23. Mosgrove, Ronald E80-11-3 

24. Nolin, Jeffrey E80-5-4 

25. Riley, John G. E80-1-1 

26. Sokoll, Francis B. and Lowenthal, Foster R., d/b/a Sokoll and Lowenthal 
Insurance Agency E79-12-1 

27. Sorrentino, Michael W. E80-4-2 

28. Tracy, William F. E80-4-6 

29. White, Dale M. , Pioneer Valley Ins. Agency, Inc. E80-4-5 



-25- 



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-26- 



As of December 31, 1980 there were 794 Insurance companies, licensed or 
approved, transacting business in the state and also 16 Health Maintenance 
Organizations. 

The kinds of companies in the various categories were as follows: 



Domestic Life 17 

Domestic Property and Casualty 48 

Domestic Title 2 

Foreign Life 276 

Foreign Property and Casualty 347 

Foreign Title 12 

"b" Company Reinsurers 54 

Surplus Lines 38 

794 

Health Maintenance Organizations 16 



-27- 



Licenses to transact business were issued to the following. 



Property and Casualty Companies 

Name of Company 

Washington International Insurance Company 
Phoenix, Arizona 



License issued 



March 3, 1980 



American Centennial Insurance Company 
Wilmington, Delaware 



March 5, 1980 



Foremost Guaranty Corporation 
Grand Rapids, Michigan 



March 18, 1980 



American and Foreign Insurance Company 
New York, New York 



March 31, 1980 



Globe Indemnity Insurance Company 
New York, New York 



March 31, 1980 



Royal Indemnity Insurance Company 
New York, New York 



March 31, 1980 



The Sumitomo Marine and Fire Insurance 
Company, Limited 
Tokyo, Japan 



April 11, 1980 



Lincoln National Pension Insurance Company 
Fort Wayne , Indiana 



April 22, 1980 



Bankers Standard Insurance Company 
Hialiah, Florida 



May 1, 1980 



New York Marine and General Insurance 
Company 

New York, New York 

* Eastern Casualty Insurance Company 
Natick, Massachusetts 



July 18, 1980 



July 18, 1980 



*Domestic Company 



-28- 



Property and Casualty Companies (cont'd) 



Name of Company 



License issued 



Taisho Marine and Fire Insurance Company 
Limited 
Tokyo , Japan 

Commercial Union Property and Casualty 
Insurance Company 
Rutland, Vermont 

P.M.I. Insurance Company 

San Francisco, California 

Credit General Life Ins. Company 
Springfield, Ohio 

Life Insurance Companies 

Association Life Insurance Company, Inc. 
Milwaukee Wisconsin 

Statesman Life Insurance Company 
Des Moines, Iowa 

Fidelity Union Life Insurance Company 
Dallas, Texas 

Columbia National Life Insurance Company 
Columbus, Ohio 

The Shelby Life Insurance Company of Shelby Ohio 
Shelby, Ohio 

Loyalty Life Insurance Company 
Southfield, Michigan 

The National Investors Life Insurance Company 
Little Rock, Arkansas 



Oxford Life Insurance Company 
Phoenix, Arizona 



First Federated Life Insurance Company 
Baltimore, Maryland 



October 10, 1980 

October 31, 1980 

December 26, 1980 
December 31, 1980 

February 1, 1980 
February 1, 1980 
March 31, 1980 
September 25, 1980 
September 25, 1980 

September 30, 1980 
November 7, 1980 

November 7, 1980 

November 24, 1980 



-29- 



Life Insurance Companies 

Name of Company 

Life Investors Insurance Company of America 
Cedar Rapids, Iowa 



License issued 



December 10, 1980 



Medico Life Insurance Company 
Omaha, Nebraska 



December 31, 1980 



Title Insurance Company 

Safeco Title Insurance Company 
Panorama City, California 



February 29, 1980 



Surplus Lines Companies 



Date listed 



North East Insurance Company 
Portland, Maine 

Gibralter Casualty Company 
Dover, Delaware 

Allianz Underwriters, Inc. 

Los Angeles, California 

Penn-America Insurance Company 
Wyncote, Pennsylvania 

Canadian Universal Insurance Company, Inc. 
Providence, Rhode Island 



January 22, 1980 

August 18, 1980 

September 12, 1980 

September 12, 1980 
September 19, 1980 



United National Insurance Company 
Philadelphia, Pennsylvania 



December 1, 1980 



Reinsurers - "b" 

Reinsurance Company of America, Inc. 
Chicago, Illinois 

Signet Reinsurance Company 
Omaha, Nebraska 



Date approved 
November 3, 1980 

November 3, 1980 



The First Reinsurance Company of Hartford 
Hartford, Connecticut 



December 22, 1980 



-30- 



Combination - Surplus Lines and Reinsurer "b" 

Illinois Union Insurance Company 
Chicago, Illinois 

Pine Top Insurance 

Phoenix, Arizona 

Health Maintenance Organizations 
Multi-Group Health Plan, Inc. 

West Suburban Health Care Plan, Inc. 
Lahey-Blue Cross-Blue Shield 
Healthguard, Inc. 

Pilgrim Health Care, Inc. 

Optometric Corporation 
Massachusetts Vision Corporation 

Companies with Approved Legal Service Plans 

Travelers Indemnity of Rhode Island 
Providence, Rhode Island 

Mid-West Mutual Insurance Company 
Des Moines, Iowa 

Medical Indemnity Insurance Company 
Worthington, Ohio 



January 22, 1980 
April 10, 1980 

Date of License 
April 11, 1980 

August 15, 1980 
August 15, 1980 
September 17, 1980 

November 24, 1980 

December 31, 1980 

Date License Amended 
February 8, 1980 

May 1, 1980 
May 30, 1980 



-31- 



Name Changes 



Company Name 

Drake Insurance Company 
of New York 

The Ministers Life and 
Casualty Union 

Crum and Forster Life 
Insurance Company 

American Reserve Life 
Insurance Company 

B.S.P. Insurance Company 



Excelsior Insurance 

Company of New York 

Metropolitan Fire 

Assurance Company 

Royal Globe Life 

Insurance Company 

Bellefonte Insurance 
Company 

Royal Globe Insurance 
Company 

Life Insurance Company 
of California 

All American Life and 
Casualty Company 

Great Equity Life 

Insurance Comapny 

Life Insurance Company 
of New Hampshire 



Date Name 
Change Effective 

January 1, 1980 



February 2, 1980 
March 11, 1980 
March 21, 1980 
May 9, 1980 
May 20, 1980 
May 28, 1980 
June 4, 1980 
June 24, 1980 
June 27, 1980 
August 1, 1980 
October 1, 1980 
October 20, 1980 
December 1, 1980 



New Company Name 

Atlantic International 
Insurance Company 

Ministers Life — A 

Mutual Life Insurance Company 

Charter Security Life 
Insurance Company 

Celtic Life Insurance 
Company 

The Great Global Assurance 
Company 

Excelsior Insurance Company 



American Independent 
Reinsurance Company 

Royal Life Insurance 
Company of America 

Bellefonte Re-Insurance 
Company 

Royal Insurance Company 
of America 

E.F. Hutton Life 
Insurance Company 

All American Life 
Insurance Company 

MGIC Life Insurance 
Corporation 

AIG Life Insurance 
Company 



Beneficial National Life December 31, 1980 
Insurance Company 



National Benefit Life 
Insurance Company 



-32- 



Companies No Longer Licensed in Massachusetts 



Date withdrew 



American Enterprise Insurance Company 



4-4-80 



*Mafket Insurance Company (Surplus Liae) 



5-2-79 



Olympic Insurance Company 



4-22-80 



Merger s 



Fidelity Union Life Insurance Company merged into Fidelity Union Life Insurance 
Company (formerly AOA Insurance Company) 

International Life Insurance Company of New York merged into American General 
Life Insurance Company of New York. 

American and Foreign Insurance Company, New York, New York merged into American 
and Foreign Insurance Company, Wilmington, Delaware. 

Globe Indemnity Company, New York, New York merged into Globe Indemnity Company 
Wilmington, Delaware. 

The National Life Assurance Company of Canada, Toronto, Ontario, Canada transferred 
its United Business to Loyalty Life Insurance Company, Southfield, Michigan. 



Redoroe stication 

The Northern Assurance Company of America redomesticated from Massachusetts to 
Vermont, effective December 31, 1980. 



*0mitted from 1979 Annual Report 



-33- 



1980 - SUMMARY OF MASSACHUSETTS 
DIRECT PREMIUMS AND NUMBER Porrrnrc 
ISSUED AND IN FORCE FOR THE MAJOR UKES O^LlMAKCE 



Ordinary 

Credit Life (Gr. & Ind.) 

Group 

Industrial 

Total Life Insurance Including 
Annuity Considerations 

(000) on-iit;ed 



Direct Premiums 
694,010 
22,039 
207,622 
3,938 
1,204,134 



Policies Issued Policies in For* 



8,459,203 
912,362 
6,557,157 
44 ,194 
15,972,916 



41,500,997 
3,010,030 
41,887,700 
468,072 
86,866, 799 



-34- 



1980 — SUMMARY OF MASSACHUSETTS 
ACCIDENT AND HEALTH INSURANCE EXPERIENCE 



ijroup 

iredit (Gr. & Ind.) 

pllectively 
! Renewable 

ion-Cancellable 

guaranteed 
Renewable 

Ml Other 

Total 

XX)) omitted 



Direct 
Premiums 
Written 

494,216 
5,998 
10,493 

34 , 282 
23,751 

23,779 
592,520 



Direct 
Premiums 
Earned 

513,561 
4,973 
10,439 

32,559 
24,336 

24,168 
610,036 



Direct 
Losses 
Paid 



Direct 
Losses 
Incurred 



420,152 428,689 

3,365 3,788 

6,752 7,278 

15,091 18,374 

15,214 15,147 

14,496 14,901 

475,070 488,535 



W/P 
Loss Ratio 

85.0 
76.2 
69.7 

44.0 
64.1 

61.0 
80.2 



E/I 
Loss Ratio 

83.5 
56.1 
64.3 

57.5 
62.2 

61.7 
80.1 



-35- 



• 1985 — SUMMARY OF MASSACHUSETTS 
MAJOR PROPERTY AND CASUALTY COVERAGES 



Fire 

Allied Lines 

Home Owners 

Commercial 
Multi-Peril 

Inland 
Marine 

Workers 

Compensation 
Auto No Fault 

(Private Passengers) 

Auto No Fault 
(Commercial) 

Auto Liability 
(Private Passengers) 

Auto Liability 
(Commercial) 

Auto Physical Damage 
(Private Passengers) 

Auto Physical Damage 
(Commercial) 

Other Liability 

(000) Omitted 



Premiums 
Written 


Premiums 
Earned 


Losses 
Paid 


78,466 


76,129 


31,428 


25,850 


24,029 


8,259 


372,786 


352,339 


149,833 


228,570 


226,224 


86,734 


70,151 


62,364 


29,446 


414,441 


402,009 


272,409 


39,403 


38,743 


29,061 


3,593 


3,586 


2,452 


464,550 


438, 723 


298,942 


19 7 IRQ 


10 Oc;A 


llx 6 SO 


435,237 


411,616 


263,255 


77,818 


74,138 


43,441 


197,587 


191,170 


67,136 



Losses W/P E/I 

Incurred Loss Ratio Loss Ratio 

32,271 39.8 42.4 

12,980 32.0 54.0 

165,689 40.2 47.0 

108,186 38.0 47.8 

29,474 42.0 47.3 

375,408 65.7 93.4 

35,592 73.8 84.1 

2,973 68.2 82.9 

343,783 64.4 78.4 

89,756 58.7 73.4 

269,357 60.5 65.4 

44,526 55.8 60.1 

119,447 34.0 62.5 



-36- 



Annual Report, 1981 
Division of Insurance 



■LICATION: #13, 237-44-250-5-83-CR 

FRCTED BY John J. Manton, State Purchasing Agent 



The Commissioner of Insurance is pleased to report to the Governor 

and to the Great and General Court of the Commonwealth the official 

transactions of the Division of Insurance for the year 1981 as required 
by M.G.L. Chapter 175, Section 17. 



Michael J. Sabbagh 
Commissioner of Insurance 



3^3 
l5lr 



TABLE OF CONTENTS 

page 



ighlights 1 

aws, Regulations and Decisions 

Laws 4 

Regulations 5 

Decisions 6 

Consent Orders. 7 

:hedule of Companies in Receivership 8 

actional Summary 

Administration 10 

Consumer Service , H 

Financial Surveillance 13 

Legal , 13 

Licensing 

Agents, Brokers and Others 14 

Motor Vehicle Damage Appraisers 15 

Examinations 

Agents and Brokers 16 

Life Insurance Companies 20 

Property and Casualty Insurance Companies 22 

Health Insurance Companies • 23 

Fraternal Organizations 24 

Retirement Systems... 25 

Retirement 27 

Special Investigation 29 

State Rating Bureau 30 

ompany Activity 

Life Insurance Companies Licensed 32 

Property and Casualty Companies Licensed 33 

Name Changes 34 

Reinsurers - "b" Approved 35 

Name Changes. 35 

Surplus Lines Companies Approved. » 35 

Name Changes 35 

Mergers. 36 

Revocations 36 

License Amendments. 36 

Insurance Companies Order to Cease - All Business 37 

Insurance Companies Order to Cease - New Business 38 

New H.M.O's Licensed 38 

New Domestic Corporations 38 

assachusetts Direct Premiums and Number of Policies Issued 

nd in Force for the Major Lines of Life Insurance.. 39 

iassachusetts Accident, and Health Insurance Experience 40 

assachusetts Major Property and Casualty Coverages..... 41 



HIGHLIGHTS 



The following items made a significant imoact upon both consumer 
and industry interests in the Commonwealth. 
I. Insurance Adviser 

A new consumer education publication entitled, "THE INSURANCE ADVISER" 
has been developed to keep the public informed about certain insurance 
issues. This publication covers timely topics of interest to the 
insurance consumer. 
II. Procedures Concerning Motor Vehicle Insurance Rates 

. A new regulation governs the format and content of auto insurance 
rate filings for commercial vehicles. This regulation improves 
Departmental efficiency and accuracy in the review of competitive 
rate filings for this class of business. 
111 • Regulation on the Appraisal and Repair of Damaged Motor Vehicles 
This regulation was amended to ease insurance company compliance 
with the standards governing appraisal and claim settlement practices. 
Unnecessary and administratively cumbersome controls were removed 
from the regulation to promote efficiency and uniformity among insurers. 
IV. Fire Insurance Applications 

A new application and instructions were promulgated to implement 
the law designed to fight arson. A mandatory application was developed 
for use by insurance companies to disclose pertinent information 
about the ownership, mortgage status, tax deliquency and other similar 
facts which will aid insurance companies in their claim settlement 
practices. 



-1- 



V. Standard Merit Rating Plan 

This regulation was revised to add further disincentives for bad 
driving habits. The principal change eliminated the 3 year payment 
schedule for surcharges; surcharges are now payable in the first 
year of billing. Thus, the penalty for repeated convictions of 
moving violations and at fault accidents is more immediate. 

VI. Blue Cross/Blue Shield Medax Rate Filing 

Blue Cross/Blue Shield, of Massachusetts proposed revising Medex 
rates upwards some 13.5% as of April 1, 1981. Medex coverage is 
available for the most part to the older residents - those 65 years 
of age or older who supplement their Federal Medicare benefits with 
additional insurance not covered by their Social Security retirement 
program. The rate filing was found to be deficient in that not all 
the pertinent factors which would have affected the experience for 
this class of business was treated consistently by the filer. By 
deviating too frequently from accepted actuarial methodology, it 
was found that the judgmental selections were not impartial but rather 
leaned more often than not to the high side. As a result, the increase 
was disapproved because the resulting rates were considered too high 
to be reasonable. 

Subsequently, Blue Cross/Blue Shield revised its original filing 
consistent with the findings made in connection with its first request. 
This time, the filer requested an increase of 7.5%. After an examination 
of the filing by all interested parties, there was agreement that 
the new filing had corrected all of the previous criticisms. New 
rates reflecting a 7.5% increase were effective April 1, 1981. 



-2- 



VII. Budgetary Constraints 
Lay-off 

In October of 1981 the Division of Insurance was forced by budgetary 
cut back to lay off thirty two (32) employees. The lay-off affected 
two classifications of positions - Senior Insurance Examiners and 
Insurance Examiners, and primarily affected the overall productivity 
of the Consumer Service and Field Audit Sections of the Division. 
Relocations 

1. Board of Appeal 

In November of 1981 the Commissioner of Insurance began planning 
the relocation of the Board of Appeal on Motor Vehicle Policies and 
Bonds. For approximately, five years the Board was located at 150 
Causeway St. in Boston which cost the Commonwealth approximately $36,000 
per year in rental and electricity expenses. The relocation of the Board 
to our offices at 100 Cambridge St. in Boston was accomplished by the 
end of 1981 and resulted in approximately a 10% reduction in the cost of 
operating the Board. 

2 . Springfield Office 

In late 1981, again due to severe funding problems that faced all 
state agencies, the Division's satellite office in Springfield had to 
be closed and some of its personnel reassigned to Government Center. 
This closing and relocation caused some trying transportation problems 
for personnel living in the western part of the state who had to commute 
to Boston on a daily round trip basis. The overall effect however, was a 
substantial expense savings that saved jobs for the Division. 



-3- 



LAWS, REGULATIONS AND DECISIONS 



LAWS 

Chap. 63 - an act providing exemption relative to fire insurance 
requirements at certain college residence halls 
and dormitories. 

Chap. 112 - an act facilitating the timely transmittal of funds 
withheld from teacher's pay checks. 

Chap. 169 - an act relative to the notification of certain persons 
in the event of lapse of certain insurance policies. 

Chap. 173 - an act allowing certain motor vehicle policies to be 
written for a period of less than one year. 

Chap. 271 - an act relative to notification of certain health 

insurance coverage to employees of local government 
units. 

Chap. 272 - an act relative to the procedures for establishing 
premium rates for dental service benefit plans. 

Chap. 274 - an act increasing the amount of dividends certain mutual 
companies may pay. 

Chap. 283 - an act authorizing loans by insurance companies of up 
to ninety percent on certain residential properties. 

Chap. 284 - an act relative to the computation of rebates in certain 
consumer credit transactions including credit life in- 
surance . 

Chap. 287 - an act regulating interest rates on life insurance 
policy loans. 

Chap. 308 - an act further regulating applications for insurance 
against loss or damage to a building by fire. 

Chap. 329 - an act prohibiting insurance companies from dis- 
criminating against blind or physically disabled persons 
in the sale of certain policies. 

Chap. 335 - an act relative to out-patient benefits payable under 
certain policies of insurance covering mental health. 

Chap. 351 - an act concerning disposition of proceeds from insurance 
presumed abandoned after 5 years. 

Chap. 392 - an act relative to continuation of insurance coverages 

of certain public officers and employees after involuntary 
termination of employment. 



-4- 



Chap. 422 - an act relative to limitations inapplicable to investment 

of assets in separate accounts of life insurance companies. 

Chap. 428 - an act providing for the attachment of group annuity contract 
benefits and the assignment of interest of group life 
policies to satisfy certain family support obligations. 

Chap. 438 - an act relating to real estate investments by insurance 
companies. 

Chap. 607 - an act further regulating the information required on 
an insured's claim form for collision coverage. 

Chap. 637 - an act relative to wage deductions for insurance for 
certain public employees. 

Chap. 654 - an act relative to the payments of benefits for mental 
illness in certain medical service contracts. 

Chap. 718 - an act relative to certain provisions of the standard 
form of fire insurance policy. 

Chap. 723 - an act relative to certain public employee wage deductions 
for insurance. 

Chap. 731 - an act further regulating public employees deferred compensation 
programs. 

Chap. 735 - an act amending the law providing for continuing health 
insurance coverage for divorced or separated spouses. 

Chap. 771 - an act requiring fire and casualty companies to attach 
a printed notice to all policies explaining reductions 
or eliminations made in coverages, conditions or definitions. 

Chap. 781 - an act providing tax exemption for public employee retirement 
system investments in investment contracts of insurance 
comp anies. 

Chap. 797 - an act authorizing the insurance commissioner to make 
certain assessments against insurance companies. 



REGULATION S 

211 CMR 79.00 Standard Merit Rating Plan 

211 CMR 89.00 Regulation Concerning the Appraisal and Repair of Damaged 
Motor 

211 CMR 91.00 A Regulation Governing Certain Procedures Concerning Motor 
Vehicle Insurance Rates 

211 CMR 100.00 Disability Retirement Allowances. 



-5- 



Decisions 
Docket // 

81-1-1 Order relating to a revision of the filing of Blue Cross/ 

Blue Shield of Massachusetts, Inc. for an increase in rates.. 

81-5-5 Stipulation of dismissal pursuant to Mass. R. Civ. Proc. 

Rule 41(a)(l)(ii) regarding Snapper v. Pollack, et. al. 

R81-5-1 Decision and Order concerning proposed changes to Rules 2, 

10, 14, and 18 of the Massachusetts Motor Vehicle Reinsurance 
Facility Rules and Regulations. 

A81-1-5 Decision on motions filed regarding Sidney Goldman d/b/a 

Bay Harbour Insurance Agency v. Allstate Insurance Company, 
et al. 

R81-5-3 Decision relative to the operation of competition among motor 

vehicle insurers. 

81-8-3 Appeal of the ruling of the Massachusetts Motor Vehicle Rein- 

surance Facility Governing Committee by Dominick M. Cirino. 

R81-8-5 Amendment to Rule 18 of the Facility Rules of Operation concerning 

the subject of "Service Fees." 

81-7-6 Findings and Decision in the matter of acquisition of control 

of Massachusetts General Life Insurance Company by American 
Commonwealth Financial Corporation. 

81-2-4 Decision by Commissioner on appeal by Massachusetts Reinsurance 

Facility regarding Twinbrook Insurance Agency, Inc. 



R81-4-3 Decision on Medical Malpractice insurance rates. 

R81-7-5 Opinion, Finding and Decision relative to territories for 

automobile insurance. 

R81-5-3 Opinion, Findings and Decision on 1982 automobile insurance 

rates. 

R81-10-1 Decision and Order concerning application of Blue Cross/Blue 

Shield of Massachusetts Inc., for approval of proposed quarterly 
non-group rates. 

80-11-7 Supplementary Findings and Decision in the matter of acquisition 

of control of United Educators, Inc. by U E Holding Corporation 



-6- 



Consent Orders 



E81-1-4 Re: Dorothy V. Lewarne - Revocation of license to do any 

insurance business in Massachusetts 

E80-11-6 Re: Frederick S. Raskin - Six month suspension of all licenses. 

E81-1-8 Re: Gilbert M. Becker - Revocation of license to do any 

insurance business in Massachusetts. 

E81-2-3 Re: A. Bruce Gage - Revocation of license to do any insurance 

business in Massachusetts. 

81-5-3 Re: Richard Lagarde - Revocation of license to do any insurance 

business in Massachusetts. 

E81-4-1 Re: Gerald F. O'Leary - Revocation of license to do any 

insurance business in Massachusetts. 

E81-4-2 Re: Robert K. Berman - Revocation of license to do any 

insurance business in Massachusetts. 

E81-1-7 Re: Ronald F. Nydam - Revocation of license to do any 

insurance business in Massachusetts. 

E81-2-1 Re: Moses Grice - Ordered to refrain from employing or accepting 

the services of Ronald L. Richardson whose insurance 
licenses were revoked. 

81-5-4 Re: Arthur L. Grant, Jr. - Surrendered all licenses to do 

any insurance business in Massachusetts. 

E80-10-1 Re: Robert A. Hubbard - Revocation of license to do any 

insurance business in Massachusetts. 

E81-6-22 Re: Michael S. Smith - Before conducting any insurance business 

in Massachusetts, respondent agrees to give Commissioner 
of Insurance 30 days prior written notice. 

E81-5-2 Re: Brian L. Cooper - Revocation of license to do any insurance 

business in Massachusetts. 

E81-7-4 Re: Robert P. Whitten - Brokers license granted for initial 

3 year period pursuant to consent agreement terms and 
conditions. 

E81-1-6 Re: Roy A. Dart, Jr. - Revocation of license to do any 

insurance business in Massachusetts. 

E80-12-1 Re: The R. Whitcomb Blakeley Insurance Agency, Inc., and 

R. Whitcomb Blakeley - All licenses revoked and $4,000 
fine . 



-7- 

















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SECTIONAL SUMMARY 



ADMINISTRATION 

The Administration section provides services such as; payroll, personnel, 
budget, revenue receipt, accounting, purchasing, and data processing 
to the Division of Insurance and the Board of Appeal on Motor Vehicle 
Liability policies and Bonds. 

Departmental revenue and expenditures for the most recent four year fiscal 
period, and the average number of employees for the four most recent 
calendar years are: 

Average . . . 

Year Revenue Expenditures Number Employees 

(7/1-6/30) 

*1981 $8,193,176 $3,339,205 166** 

1980 7,863,697 3,697,675 185 

1979 7,131,152 3,712,000 193 

1978 5,852,857 3,911,477 233 

*The fiscal T 81 revenue amount of $8,193,176 includes assessments established 

by law of $2,406,063.96 levied against insurance companies in 1981 for 

the "FY 80" operating expenses of the following Agencies and Commissions: 

Fire Fighting Academy $ 485,131.70 

Merit Rating Board 1,214,168.96 

Attorney General /Consumer Division 155,139.18 

State Rating Bureau 418,875.30 

Medical Malpractice Commission 101,571.14 

Special Commission on Automobile Insurance 31 , 177 . 68 

2,406,063.96 

**In October of 1981 thirty two (32) employees had to be laid off to comply 
with budgetary constraints. Thus, the actual number of employees at year 
end was one hundred and thirty-three (133) . 



-10- 



CONSUMER SERVICE 

This section was involved with over 7500 cases during the year which 
were brought to the attention of the Division by consumers. Examiners assigned 
to the section classified each case and assisted in its resolution as indicated 
in the summary which follows. The consumer obtained a favorable result in more 
than 3,500 cases. Some 2,200 alleged complaints were found either groundless 
or beyond the jurisdiction of the Division. In addition, the section's examiners 
responded to more than 1700 informational requests from consumers. Consumers 
were "indemnified by an additional $741,590 for losses covered by their policies 



through the 


efforts 


of the section. 
















CHART I - RELIEF 


BY 


• 

NUMBER OF 


CASES 










Line 


of 


Insurance 








Is X oLJ U o X L XvJl.1 


Auto 


Homeowners 


T -J 

Lite 


Health 


Other 


Tots 


Additional Money 


305 


38 




8 


53 


q 


A1 ' 


Recieved 
















Cancell ati nn 




18 




c 

J 


i a 
io 


2 


15( 


Withdrawal 














Policy Renewal 


3 


4 




5 


4 


1 


r 


Premium Refunded 


138 


44 




55 


32 


14 


28: 


Premium Problem 


145 


14 




44 


13 


11 


22' 


Resolved 














Claim Paid 


837 


98 




52 


242 


34 




Coverage Extended 


66 


10 




11 


49 


5 


14: 


Referral to 


49 


2 




4 


15 


9 


T 


Proper Agency 
















Other 


527 


87 




157 


153 


69 


99 


Relief 


2183 


315 




341 


579 


154 


357 








■11- 











CHART II - NO RELIEF BY NUMBER OF CASES 



Line of Insurance 



j position 



Auto 



Homeowners 



Life 



Health 



Other 



Total 



t st ion of Fact 271 
'0 Jurisdiction 64 



36 
11 



34 
2 



44 
15 



32 
6 



417 
98 



,ty. Retained 51 

lered 75 

Ibitration 

tiparative 44 
I gligence 

llicellation 149 
l.held 

iii-Renewal 4 
l.held 

timium Correct 90 

[iim Correctly 313 
kid 

liims Denied 234 
!"operly 

r ( er 84 

« Relief 1379 

i.ief and No Relief 
Iscellaneous 



10 
20 



10 




15 

8 

25 
26 

75 

19 



246 



16 
14 

11 

29 
112 



21 



26 
85 

132 

27 
365 



11 
7 

20 

11 
104 



84 
96 

47 

192 

17 

170 
445 

472 

170 
2208 

5780 

1735 
T3T5 



-12- 



i 



FINANCIAL SURVEILLANCE 

The Financial Surveillance Section was established as a result of a 
recommendation by the National Association of Insurance Commissioners to 
protect against insolvencies. In keeping with this goal the section reviewed 
the annual statements of over 800 insurance companies authorized or licensed 
to do business in the Commonwealth. These companies collected in excess 
of $4.5 billion in premium from Massachusetts policyholders during the 
year. During 1981, 72 companies were monitored on a quarterly basis and 
8 companies were monitored on a monthly basis. 

This section reviewed the audit reports required by Regulation 211 CMR 
91.00 "Audits of Insurers by Independent Certified Public Accountants". 

The Health Maintenance Organizations licensed in the Commonwealth 
must also file financial reports which receive comparable attention. 

Company licensing is also an integral part of this section. All admissions, 
renewals of licenses, mergers of companies, name changes, fee payments 
and corporate changes were administered here. 

The statistics for statutory assessments against the companies were 
collected for calculation. 

LEGAL 

The Legal Section prosecuted 31 administrative cases against companies, 
agents, brokers, and motor vehicle damage appraisers. These actions sought 
the suspension or revocation of licenses and the imposition of monetary 
penalties. The attorneys also represented the Division at other types 
of administrative hearings (i.e. rules and regulations). 

The section referred 10 civil and criminal cases to other law enforcement 
agencies; and further assisted in those cases where the Commissioner 



-13- 



was a named defendant. 

A substantial portion of the section's time was devoted to counselling 
other sections of the Division. A variety of inquiries from companies, 
agents and brokers, the public, and governmental agencies were referred 
to the section for response. 
LICENSING 

Agents/Brokers and Others - This section continued the maintenance of 
records of agents, brokers, special brokers, insurance advisers and fire 
loss adjusters and for corporations and partnerships. 

Testing for licensure was done by Educational Testing Service of 
Princeton, New Jersey, under contract with the Division. Applicants for 
Insurance Advisers and Fire Loss Adjusters were tested by the Division. 

In 1981, 22,490 new applications for agents and brokers licenses were 
issued; and 82,104 agents licenses were renewed; 13,513 agents licenses were 
cancelled. Also, a total of 216 new Fraternal Agents licenses were issued. 
The number of other licenses processed during the year are shown below: 



Individual and Trade names - renewal and new 10,047 
licenses issued 

Corporation licenses renewed 1,430 

Special Brokers licenses renewed and new 246 
licenses issued 

Partnership licenses issued or renewed 261 

Insurance Advisers licenses issued or renewed 318 

Fire Loss Adjusters licenses issued or renewed 66 



-14- 



Educational Testing Service (E.T.S.) 



E.T.S. exams recorded the following results: 



Type of Exam No . Taken No. Passed No. Failed % Passed 

Life 2,379 1,067 1,312 45% 

Accident & Health 2,357 1,327 1,030 56% 

Property 1,266 749 517 59% 

Casualty 1,380 725 655 53% 

Totals 7,782 3,868 3,514 53% 



Motor Vehicle Damage Appraisers _ This section Is responsible for 

the testing and licensing of all applicants for Motor Vehicle Damage Appraiser 

licenses. 

During 1981, 645 tests were administered and 520 new licenses were 
issued. As of December 31, 1981 there were approximately 7,000 licensed 
Motor Vehicle Damage Appraisers. 

Section 113M of Chapter 175 originally authorized the existence of this 
section within the Division but the law was repealed in 1981. Chapter 775 
of the Acts and Resolves of 1981 created a new Auto Damage Appraisers 
licensing Board outside the regulatory authority of the Commissioner of 
Insurance . 



-15- 



EXAMINATIONS 



Agents & Brokers - This Section is responsible for the financial 
examination of insurance agencies, the investigation of complaints as assigned, 
the license review of applicants for designated broker status, the collection 
of the 4% tax on all surplus lines business placed by special brokers; and 
the collection of license fees from Automobile Clubs licensed by the Division. 

The projects completed by this section are: 

Agency Examinations 122 

Insurance Matters Investigated (complaints) 38 

Auto Club license Fees Collected (FY81) $14,535 

Facility Applicants Licenses Reviewed 202 

*4% Surplus Lines Premium Tax Collected $2,044,101 

*This represents an increase of $104,182 over 1980 and was collected 
from 305 Special Brokers. 

Agencies Examined 

Harold L. Mottard Insurance Agency 
Roxbury, MA 

N. Pingree Insurance Inc. 
Haverhill, MA 

Thomas Minichello Insurance Agency 
Haverhill, MA 

Beverly Bouchard Insurance Agency 
Haverhill, MA 

Bedard & Michaud Insurance Agency 
Lawrence , MA 

Brighton Insurance Agency 
Brighton, MA 

Cecil Marchione Insurance Agency 
Somerville, MA 

Triangle New England 
Lowell, MA 



H.T. Bailey Insurance Co. 
Boston, MA 

John E. McDonald & Son 
Springfield, MA 

A.G. Gibeau Insurance Agency 
Lawrence, MA 

J.J. Bodner Insurance Agency 
Water town, MA 

Hutch Insurance Agency 
Brighton, MA 

Thomas Coughlin Insurance Agency 
Cambridge, MA 

Insurance by Fisher 
Brookline, MA 

Greater Lawrence Insurance Agency 
Lawrence , MA 



-16- 



Agencies Examined (cont'd) 



Coolidge Associates 
Water town, MA 

Thomas Cappadona Insurance Agency 
Waltham, MA 

Kline Insurance Agency 
Waltham, MA 

Merrimac Valley Insurance Agency 
Billerica, MA 

Vaughan and Baldwin, Inc. 
Burlington, MA 

B&M Insurance Agency, Inc. 
Waltham, MA 

Wallace Insurance Agency 
Waltham, MA 

Downtown Insurance Agency 
Lawrence , MA 

Warren Sinclair Insurance Agency 
Waltham, MA 

Zaharris Insurance Agency 
Maiden, MA 

Compagna Insurance Agency 
Lawrence, MA 

Shawn Bercury, Inc. 
Newton , MA 

Galante Insurance Agency 
Cambridge, MA 

Anawan Insurance Agency 
W. Roxbury, MA 

Gange Insurance Agency, Inc. 
Newton Center, MA 

Barry & Farrell, Inc. 
Needham, MA 

Edwin C. Lucey, Insurance 
Maiden, MA 

Robert Stillman 
Dorchester, MA 



Angelo Boncore, Insurance 
Medford, MA 

Harry Beder, Insurance 
Maiden, MA 

Nicholas E. Catino 
Medford, MA 

Andrew H. Creen, Insurance 
Worcester, MA 

William Collins, Insurance 
Dorchester, MA 

Melvin Convicer 
Chelsea, MA 

Evernowski Insurance Agency 
Worcester, MA 

Rea Harkins, Insurance 
Maiden, MA 

John B. Corey Insurance Agency 
Everett, MA 

Norcia Insurance Agency 
Everett, MA 

New Main Street Insurance Agency 
Worcester, MA 

Giganti Insurance Agency 
Everett, MA 

Ahmed Insurance Agency, Inc. 
Salem, MA 

Gilberg Insurance Agency 
Melrose, MA 

James Gilbert Insurance Agency 
Melrose, MA 

A.B.S. Insurance Agency 
Swamp scott, MA 

Benjamin E. Gallant Insurance 
West Newton, MA 

Cape and Islands Insurance, Inc. 
Sandwich, MA. 



-17- 



Agencies Examined (cont'd) 



Burke Insurance Agency 
(Hofman Insurance Agency Inc) 
Brookline, MA 

Hilda Bohn Insurance Agency 
Needham, MA 

John J. Honan 
Lowell, MA 

Alan Hoffman 
Brookline, MA 

David Strong 
Reading, MA 

Marvin S. Kaplan 
Brookline, MA 

Avaras Insurance Agency 
Lowell, MA 

Simon Kaplan, Inc. 
Brookline, MA 

Louis J. Kirsh, III 
Waltham, MA 

Richard Jones Insurance 
Pax ton, MA 

Vito Virzi 
Worcester, MA 

Gould & Son, Inc. 
Chelsea, MA 

J & B Insurance Agency 
Chelsea, MA 

Handfield Insurance 
Worcester, MA 

Francis X. Kearns 
So. Boston, MA 

Aljane Insurance Inc. 
Medford, MA 

Bernard R. Conte Insurance 
Paxton, MA 



Jack Chekij ian Insurance 
Peabody, MA 

William Mullang 
Peabody, MA 

John J. Lamb 
Hingham, MA 

Don Silver Insurance 
So. Lancaster, MA 

Harris-Murtagh, Inc. 
Peabody, MA 

Mazow Insurance Agency 
Charlestown, MA 

Neil Lupardo Insurance 
Cambridge, MA 

Dee-McDonald Insurance 
Waltham, MA 

Ann M. McDonald 
Newton, MA 

McGunnigle Insurance Agency 
Quincy, MA 

Lawrence Costello, Insurance 
Billerica, MA 

John Marciello 
Somerville, MA 

Triple "L" Insurance Agency 
Billerica, MA 

Edward A. Sandler 
Maiden, MA 

Frederick Tobman 
Quincy, MA 

Robert Shannon 
Medford, MA 

Michael J. Driscoll 
Billerica, MA 



-18- 



Agencies Examined (cont'd) 



Sanviti Insurance Agency 
Everett, MA 

Eastern Special Risks 
Burlington, MA 

Francis C. Vita, Inc. 
Medford, MA 

N . B . Modugno 
Lynn , MA 

U.S. Insurance Agency 
Winchester, MA 

Fred B. Church, Inc. 
Lowell, MA 

Frank Baker Insurance Agency 
Randolph, MA 

Atlantic General Insurance 
Burlington, MA 

Leon B. Kilgare 
Lynn , MA 

Caddell & Byers 
Lowell, MA 

John H. Burke 
Hude Park, MA 

Paul C. Bissett 
Stoughton, MA 

Picken Insurance Agency 
No. Chelmsford, MA 

Pacific Insurance Agency 
Dorchester, MA 

Bjorklund Insurance Agency 
Milton, MA 

Lenfest Insurance Agency 
Chelmsford, MA 

Carvalo & Signoriello 
Mansfield, MA 



-19- 



James R. Kyle 
Lexington, MA 

Burr Insurance Agency 
Worcester, MA 

John D. Walsh, Inc. 
Pembroke, MA 

Norcross & Leighton 
Lowell, MA 

Butterfield Insurance Agency, Inc. 
Kingston, MA 

J.W. Travers Insurance Aency, Inc. 
Quincy, MA 

Philip Bruns Insurance Agency, Inc 
Winthrop, MA 

David C. Wells Insurance Agency 
Fitchburg, MA 

Walter E. Henry Insurance Agency 
Holden, MA 

Montgomer & Collins, Inc. 
Boston, MA 

Edward Talbot Insurance Agency 
Chelmsford, MA 

James L. Cooney 
Lowell, MA 

Roy T. Johnson Insurance 
Chelmsford, MA 

Robert R. Wilson Insurance Agency, 
Chelmsford, MA 

Commercial Business Insurance, Inc 
Worcester, MA 

Samko and Long Insurance 
Worcester, MA 

Wadleigh Insurance Agency 
Worcester, MA 

Richard George 
Somerville, MA 





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-2 



Life Insurance Valuation Fees 

The following schedule shows the valuation fees collected in 1981 on 
1980 business. These fees are collected in accordance with Section 14, 
Chapter 175 of the Massachusetts General Laws. 

In addition, the Valuation Unit, collected $9,120 for certificates issued 
in connection with the valuation of life insurance company reserves. 



AM Life Insurance 


$ 4,192.09 


Assumption 


729.49 


Berkshire Life 


11,324.31 


Boston Mutual Life 


24,148.90 


John Hancock Mutual Life 


552,772.11 


John Hancock Variable 


14.06 


Liberty Life 


18,912.47 


Life of America 


446.39 


Mass. General Life 


3,062.30 


Mass. Indemnity and Life 


24,546.95 


Mass Mutual Life 


209,042.10 


Monarch Life 


9,601.89 


New England Mutual Life 


129,129.95 


Patriot General Life 


1,623.12 


Paul Revere Life 


24,187.05 


Paul Revere Variable 


960.94 


State Mutual Life 


60,919.92 


United Educators Life 


132.65 


TOTAL 


$1,075,744.69 



-21- 



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-23- 



FRATERNAL ORGANIZATIONS EXAMINED 



UNAS SIGNED 

LODGES ASSETS LIABILITIES SURPLUS 

Catholic Association of $9,569,758 $8,537,960 $1,031,798 

Foresters 



SOCIETIES NOT ON LODGE SYSTEM 
(SECTION 45 Ch. 176 M.G.L.) ASSETS 



Holyoke Firemen's Relief $30,087 
Association 

Holyoke Police Relief $205,009 
Association 

Independent Slovak Roman 
and Greek Catholic 

Society of St. Stephen $228,074 

Andover Police Relief $121,317 
Association 

Strathmore Beneficial $61,951 
Association 



-24- 



RETIREMENT SYSTEMS EXAMINED 



COUNTIES 

Barnstable County 
Bristol County 
Dukes County 
Hampshire County 
Plymouth County 
Worcester County 

CITIES & TOWNS 

Amesbury 

Clinton 

Danvers 

Fairhaven 

Falmouth 

Haverhill 

Hull 

Lawrence 
Low«ll 
Marlboro 
Melrose 

Milford 
Milton 
Natick 
Needham 



ASSETS SURPLUS 

$19,792,868 $707,060 

17,018,177 547,473 

1,585,177 65,250 

9,189,673 339,218 

26,998,674 797,918 

27,713,998 950,301 



$ 2,138,620 
1,583,728 
6,881,630 
1,428,755 
3,156,976 
11,960,906 
2,227,400 
12,716,203 
17,658,768 
3,766,255 
5,446,952 
2,537,891 
5,446,952 
6,407,626 
7,668,038 



$ 92,371 
57,991 
244,979 
54,998 
94,394 
433,362 
130,771 
398,329 
489,120 
98,785 
197,132 
47,689 
228,089 
340,498 
260,133 



-25- 



RETIREMENT SYSTEMS EXAMINED 



(Cont.) 



ASSETS 



SURPLUS 



New Bedford 

Newburyport 

Norwood 

Peabody 

Pittsfield 

Quincy 

Revere 

Stoneham 

Worcester 



$19,498,774 
2,188,814 
5,390,071 
9,671,198 
12,053,785 
24,692,108 
7,922,352 
4,347,301 
43,189,834 



$ 722,124 
51,147 
195,501 
290,175 
462,689 
795,671 
211,762 
153,513 

1,102,878 



State Retirement $701,918,253 17,040,930 

Mass. Port Authority 12,593,686 742,837 



-26- 



RETIREMENT This section verified the pension allowances 

granted by the 104 Retirement Systems to their retiring employees in 
accordance with the provisions of Chapter 32. 

Assets and liabilities were examined and evaluated in order to estimate 
costs for financing each of the systems. Proper appropriation for each 
county, city and town was then made on the basis of the findings and 
examination reported by the Section. Expenses incurred for each examination 
were reimbursed to the Commonwealth by the examinee. 

The financial status of each system was determined on the basis of 
the extent of annuity reserves and interest rates credited to the retirement 
funds of the particular county, city and town. 



-27- 



The following schedule shows the number of retirees by system during 



1981. 




CITIES & TOWNS 


Adams 


9 


Amesbury 


16 


Andover 


21 


Arlington 




Athol 


14 


Attleboro 


26 


Belmont 


13 


Beverly 


45 


Blue Hills 




Reg. School 


1 


Boston 1102 


TCtp i n frpp 


38 


Brockton 


59 


Brookline 


51 


Cambridge 


114 


Chelsea 


28 


Chicopee 


53 


Clinton 


6 


Concord 


15 


Dan vers 


10 


Dedham 


13 


Easthampton 


17 


Everett 


45 


Fair haven 


10 


Fall River 


99 


Falmouth 


20 


Fitchburg 


39 


Fr am Ingham 


46 


Gardner 


12 


Gloucester 


20 



Greater Law. 
San. Dist 

Greenfield 9 

Haverhill 58 

Hingham 15 

Holyoke 49 

Hull 6 

Lawrence 67 

Leominster 15 

Lexington 29 

Lowell 67 

Lynn 117 

Maiden 51 

Marblehead 26 

Marlborough 14 

Mass. House ing 3 
Finance Agcy 

Mass. Port 13 
Authority 

Mass Turnpike 43 
Authority 

Maynar d 2 

Medford 43 

Melrose 29 

Methuen 18 

Milford 19 

Milton 16 

Montague 5 

Natick 23 

Needham 29 

New Bedford 89 



Newburyport 


18 


Weymouth 


38 


Newton 


66 


Winchester 


27 


North Adams 


16 


Winthrop 


10 


Northampton 


18 


Woburn 


16 


North 




Worcester 


212 


A t - 1* 1 p V» r»T* o 

riU Lie UUI \J 


18 


State 


2700 




4 


Teachers 


1521 


C JL WUUU 


14 

X *T 


TOTAL 


8547 


Pp flhoHv 

x c. d lj \j vx y 


61 








53 


COUNTIES 




P 1 vmm i i" V» 
i xyuiuui.il 


26 






Ouincv 


124 


Barnstable 


115 


Pp a dine? 


16 


Berkshire 


27 


1\G V _'_ C- 


43 


Bristol 


105 


Qp 1 pin 

Ja XC ill 


69 


Dukes 


10 


Saugus 


10 


Essex 


95 


^ V» T P T*7 1 1 T V 
1 1 X CWoUUl jr 


27 


Franklin 


28 


TlrvmPTiri Tip 


110 


Hampden 


87 


Southbridge 


7 


Hampshire 


43 


O^J L XII fL X. xc x u 


1 78 

x / u 


Middlesex 


300 


Stoneham 


15 


Norfolk 


180 


Swamp scott 


18 


Plymouth 


179 


Taunton 


42 


Worcester 


176 


Wakefield 


30 


TOTAL 


1345 


Walt ham 


62 






Watertown 


29 


Grand 


9892 


Webster 


6 


Total 




Wellesley 


21 






Westf ield 


27 






W. Springfield 30 







-28- 



SPECIAL INVESTIGATION 

This section investigated violations of insurance laws reported by 
the public and particular matters referred to it by the Commissioner This 
year a special effort was made with respect to policies sold to the elderly 
those policies supposedly extending Medicare coverages. As a result 
of the investigations, a considerable number of unfair and deceitful 
practices were discovered where duplication or inferior coverages were 
sold either directly or as replacement to elderly consumers. Evidence 
was collected which tended to indicate that serious problems existed; 
that abuses existed not only with respect to misrepresentation of the 
insurance service offered bllt Also discovered was some" intimidation and 
outright larceny by a group of agents preying upon senile senior citizens. 

Collected evidence was referred to the Legal Section for administrative 
action at the Division level against licensees found to have been involved 
and to the Attorney General and Federal authorities where criminal activity 
was discovered. 

As a consequence of this activity, Massachusetts residents recovered 
more than $95,000 in premium refunds. The Commonwealth received some 
$5,000 in penalty payments from Agents and Brokers and the Attorney General 
recovered additional money for unwary consumers. These refunds and 

restitutions were in addition to recoveries reported by the Consumer 

Service Section. 



-29- 



THE STATE RATING BUREAU - (SRB) 

The SRB was established by Chapter 728, Acts of 1975 and is responsible to 
the Commissioner of Insurance for rate recommendations for automobile insurance 
and for homeowner coverage, and for such other rate reviews as the Commissioner 
assigns. 

The Bureau is divided into various sections made up principally of actuaries 
and analysts for Life, Accident and Health, Property, Casualty and Inland 
Marine Insurance. 

The SRB participated in or assisted the Commissioner and the other sections 
of the Division in the following areas of concern: 

1. Automobile Rates for 1982 - The SRB prepared a filing of 15.5% for 1982 
rates which recommendation was substantially below that which was proposed by 

the industry. The preparation of this filing was a major effort involving in-depth 
research with regard to every facet of the ratemaking process. Also involved 
was a thorough analysis of the industry filing, a technical document of over 
500 pages. The SRB defended its filing during the rate hearing process which 
lasted several weeks. During the hearings, members of the SRB gave extensive 
testimony as expert witnesses regarding the various filings. Automobile insurance 
will generate premiums of over one billion dollars in 1982. 

2. Medical Malpractice - The SRB had been involved in the annual process 
which results in the establishment of Medical Malpractice rates. 

3. Open Competition for Commercial Automobile - The guidelines prepared by 
the SRB, allowed a smooth transition to competitive rates for Commercial Automobile 
Insurance. The SRB reviewed over 20 filings for rates to be effective July 1, 1981. 



-30- 



4. Automobile Territories - a refinement of Massachusetts' unique 
experience based territory system was implemented. Each town is assigned to an 
automobile rate territory based on its actual history of accidents, rather than 
merely where it is geographically located in the state. The refinements dealt 
with the problem of the limited amount of data available from the smaller towns, 
as well as the problem of how to incorporate the more volatile data from liability 
coverages. 

5. Blue Cross/Blue Shield - The SRB provided expert testimony at public 
hearings held on rate increase requests of Blue Cross and Blue Shield (The Blues) 
for Medicare Supplement and non-group plans. 

Policy Forms Section 

The Policy Forms section reviewed over one thousand four hundred and fifty 
forms and over three thousand rate filings in the Property and Casualty Insurance 
area. 

Also one thousand one hundred and fifty Individual Accident and Health forms 
were approved, while four hundred and thirty were disapproved. In additon four 
hundred and forty Accident and Health rate filings were accepted while one hundred 
and thirty one were disapproved. 

Two thousand four hundred individual life and annuity forms were approved, 
while three hundred and fiftv were disapproved. One thousand three hundred group 
life and annuity forms were approved, while one hundred and sixty were disapproved. 

The Life Actuarial Section examined the actuarial assumptions in individual 
life and annuity forms submitted for approval and issuance in the Commonwealth 
of Massachusetts by seventeen domestic and two hundred seventy-eight foreign 
life insurance companies. It ensures that the benefits not only meet the minimum 
requirements of our General Laws, but that they are calculated in accordance with 
the method, interest rate assumptions, and mortality tables, as specified in the 
policy. 

-31- 



COMPANY ACTIVITY 



Life Companies 

Name of Company 

North American Life and Casualty Company 
Minneapolis, Minnesota 

American Life and Casualty Insurance Col 
Fargo, North Dakota 

Chub /Colonial Life Insurance Company 
of America 
Dover, Delaware 

World Book Life Insurance Company 
Chicago, Illinois 

General Services Life Insurance Company 
Washington, D.C. 

Insuramerica Corp. 
Wichita, Kansas 

United Standard Assurance Company 
Indianopolis, Indiana 

Life Insurance Company of the Southwest 
Dallas, Texas 

North American Life Assurance Company 
Toronto, Canada 

Travelers Life and Annuity Company 
Hartford, Connecticut 

INA Life Insurance Company 
Los Angeles, California 

Amoco Life Insurance Company 
Omaha, Nebraska 

Indianapolic Life Insurance Company 
Minneapolis, Minnesota 

Omaha Financial Life Insurance Company 
Atlanta, Georgia 

Resources Life Insurance Company 
Fort Lee, N.J. 



Date of License 
January 1, 1981 

April 10, 1981 

April 10, 1981 

April 10, 1981 
May 15, 1981 
May 15, 1981 
May 15, 1981 
July 16, 1981 
July 16, 1981 
September 1, 1981 
October 1, 1981 
October 27, 1981 
October 27, 1981 
October 30, 1981 
September 30, 1981 



-32- 



Life Companies (cont'd) 



Intercontinental Life Insurance Company 
Elizabeth, N.J. 

MML Penison Insurance Company 
Springfield, Massachusetts 

Security-Connecticut Life Insurance Co. 
Avon, Connecticut 

Kemper Investors Life Insurance Co. 
Chicago, Illinois 



Property and Casualty Companies 

Teachers Insurance Company 
Springfield, Illinois 

Liberty Mortgage Insurance Company 
Madison, Wisconsin 

The New Zealand Insurance Company Limited 
San Fransicso, California 

American Automobile Insurance Company of 
Illinois 

Chicago, Illinois 

New Engladn Guaranty Insurance Company, Inc. 
Montpelier, Vermont 

MGIC Indemnity Corp. 

Milwaukee, Wisconsin 

Colonial Penn Insurance Company of 
Philadelphia 

Philadelphia, Pennsylvania 

Untied Guaranty Commercial Insurance Company 
of Iowa 

Bettendorf, Iowa 

Republic Western Insurance Company 
Phoenix, Arizona 

Heritage Insurance Company of America 
Lincolnwood, Illinois 



December 1, 1981 
December 1, 1981 
December 31, 1981 
December 31, 1981 

February 12, 1981 
February 23, 1981 
March 6, 1981 
May 20, 1981 

May 20, 1981 
January 1, 1981 
June 4, 1981 

July 15, 1981 

August 17, 1981 
September 18, 1981 



-33- 



Property and Casualty Companies (cont'd) 



C.U. Homeland Insurance Company 
Boston, Massachusetts 

Citation Insurance Company 
Webster, Massachusetts 

Employers Reinsurance Corp 
Overland Park, Kansas 

The Catholic Relief Insurance Company 
of America 
Omaha, Nebraska 

General Electric Mortgage Insurance Corp. 
Cincinnati, Ohio 

Mutual Service Casualty Insurance Company 
Arden Hills, Minnesota 

Investors Mortgage Insurance Company 
Chicago, Illinois 



September 29, 1981 
November 6, 1981 
September 30, 1981 
December 1, 1981 

December 1, 1981 
December 1, 1981 
December 31, 1981 



Name Changes 



Company Name 

Security Life and 
Accident Company 



Date Name 
Change Effective 

July 15, 1981 



New Company Name 

Security Life of Denver 
Insurance Company 



Premier Insurance July 1, 1981 

Company 

Occidental Life Insurance September 1, 
Company of California 

United Benefit Life December 16, 

Insurance Company 

The Artisans Life December 31, 

Insurance Cooperative 
Socie ty 



Transamerica Premier 
Insurance Company 

1981 Transamerica Occidental 

Life Insurance Company 

1981 United of Omaha Life 

Insurance Company 

1981 Cooperants Mutual Life 

Insurance Society 



-34- 



Reinsurers "b" 



Name of Company 



Date Authorized 



Commercial Union Reinsurance Company 
Wilmington, Delaware 

BLC Insurance Company 
Des Moines, Iowa 

American Excess Insurance Company 
Wilmington, Delaware 

Ohio Reinsurance Corp 
Celina, Ohio 

San Francisco Reinsurance Company 
San Francisco, California 



May 8, 1981 
September 1, 1981 
October 20, 1981 
October 30, 1981 
December 2, 1981 



Reinsurers 'V - Name Change 

Date Name 



Company Name 

M.F.A. Mutual 
Insurance Company 



Change Effective 



July 1, 1981 



New Company Name 

Shelter Mutual Insurance 
Company 



Surplus Lines Companies 



Name of Company Date Approved 

Zurich American Insurance Company March 6, 1981 

of Illinois 
Chicago, Illinois 

Pacific Insurance Company September 25, 1981 



Surplus Lines - Name Change 

Date Name 

Company Name Change Effective New Company Name 

Commercial Union Surplus January 1, 1981 Falcon Insurance Co. 

Lines InsuranceCompany 

Cranford Insurance Company January 1, 1981 American Special Risk 

Insurance Company 



-35- 



Mergers 

Tiger Investors Mortgage Insurance Company merged into Investors Mortgage 
Insurance Company -January 31, 1981. 

MGIC Indemnity Corp., New York, New York merged into MGIC Indemnity Company, 
Milwaukee, Wisconsin - January 1, 1981. 

All ianz Minnesota Life Insurance Company merged into North American Life and 
Casualty Comapny - January 1, 1981. 

American Agency Financial Corp merged into American Agency Life Insurance 
Company - September 30, 1981. 

Resources Life Insurance Company, Wilmington, Delaware merged into Resources 
Life Insurance Company, Fort Lee, New Jersey - July 15, 1981. 

Getty Reinsurance Corp merged into Employers Reinsurance Corp. - September 30, 1981, 

Security-Connecticut Insurance Corp. merged into Security-Connecticut Life 
Insurance Company - December 31, 1981. 

Kempers Investors Life Insurance Company, Los Angeles, California merged into 
General Accident Insurance Company of America - December 31, 1981. 



Insurance Company's License Revoked 

Proprietors Insurance Company 
Delaware, Ohio 



September 4, 1981 



Insurance Companies - License Amendments 

Name of Company Additional Lines 



Albany Insurance Co. 
New York, N.Y. 



Fidelity and Surety 
Commercial Property 



Birmingham Fire Insurance Accident & Health 

Company of Pennsylvania 
Pittsburg, Pennsylvania 

Preferred Mutual Insurance Workers' Compensation 
Company 

New Berlin, New York 

Calvert Fire Insurance Ocean, Inland Marine, 

Company Boiler (No Inspector) 

Philadelphia, PA' Liability other than 

auto. Glass, Burglary, 
Robbery, Theft, Commercial 
Property. 



Effective Date 
January 12, 1981 

March 16, 1981 
May 8, 1981 
May 27, 1981 



-36- 



I 



Insurance Companies - License Amendments (cont'd) 




Name of Company 


Additional Lines 


Effective Date 


Mission Insurance 

Company 
Los Angeles, California 


Fidelity and Surety 


Qpr> fptnlipr 1 L 1 Qftl 

pi LCUIUCL X *T , J_ _70J_ 


National Insurance 
Underwriters 


Liability other than 
auto, Comp . M.V. and 
aircraft restricted 
to aircraft only 


September 28, 1981 


Mass. Casualty 

Insurance Company 
Boston, MA 


Reinsurance except life 


October 28 1981 


American Protection 
Insurance Company 
Long Grove, Illinois 


Workers' Compensation 
Liability other than 
auto 


November 4. 1981 


Bay State Insurance 

Company 
Andover, MA 


Commercial property 


November 10 1981 


Agricultural Insurance 

Company 
Cincinnati, Ohio 


Auto liability 


November 30, 1981 


The National Investors 

Life Insurance Company 
Little Rock, Arkansas 


Accident & Health 


December 10 1981 


Potomac Insurance Company 
Philadelphia, Penn. 


Worker's Compensation 
Auto Liability 


December 10, 1981 


Insurance Companies ordered to Cease From Transacting 
During 1981 


All Business in Massachusetts 


Name of Company 


Date 




Reliable Life and 
Casualty Co. 
Madison, Wisconsin 


September 15, 1981 
-37- 





Insurance Companies Ordered to Cease "Writing New Business In Massachusetts 
Until Further Notice Because of Financial Condition 



Name of Company 

Foundation Life Insurance Company of America 
Chatham, New Jersey 

National Insurance Underwriters 
St. Louis, Missouri 

Merchants Mutual Insurance Company 
Buffalo, New York 

Merchants Mutual Insurance Company 
of New Hampshire, Inc. 
Manchester, New Hampshire 

H.M.O. 's Licensed - New 

Name of H.M.O. Type 

Family Health Plan of I. P. A. 

Mass. Inc. 

Tufts Associated Health I. P. A. 

Plan 



New Domestic Corporations 



Citation Insurance Company 
C.U. Homtland Insurance Company 



Date 
March 3, 1981 

April 1, 1981 

March 25, 1981 

March 25, 1981 

Date of License 
October 8, 1981 

October 26, 1981 

Licensed 
November 6, 1981 
September 29, 1981 



-38- 



1981 _ SUMMARY OF MASSACHUSETTS 
DIRECT PREMIUMS AND NUMBER OF POLICIES 
ISSUED AND IN FORCE FOR THE MAJOR LINES OF LIFE INSURANCE 

lie 

Direct Premiums Policies Issued Policies in Forest 

Ordinary 745,113 10,428,788 45,730,423 jty 

Credit Life (Gr. & Ind.) 22)555 82A>526 2,879,155 k 

Gr ° UP 219,347 8,994,542 50,594,677 l0 ' 



Industrial 

3,230 17,668 443,985 

Total Life Insurance Including 

Annuity Considerations ~ 1,291,890 20,265,525 99,648,240 

(000) omitted 



1 



1981 — SUMMARY OF MASSACHUSETTS 
ACCIDENT AND HEALTH INSURANCE EXPERIENCE 



[fsdit (Gr. & lnd.) 

[llectively 
Renewable 

Jim-Cancellable 

liaranteed 
Renewable 

H Other 

Total 

00) omitud 



Direct 
Premiums 
Written 


Direct 
Premiums 
Earned 


Direct 
Losses 
Paid 


Direct 
Losses 
Incurred 


W/P 
Loss Ratio 


E/I 
Loss Ratio 


551,209 


571,798 


467,791 


. 477,447 


84.9 


83.5 


7,046 


6,079 


3,771 


3,675 


53.5 


60.5 


11,198 


10,903 


6,789 


6,840 


60.6 


62.7 


37,856 


35,483 


15,163 


21,678 


40.1 


61.1 


22,704 


23,238 


14,328 


15,191 


63.1 


65.4 


24,311 


24,312 


14,888 


16,992 


61.2 


69.9 


654,324 


671,813 


522,730 


541,823 


79.9 


80.7 • 



-40- 



1981— SUMMARY OF MASSACHUSETTS 
MAJOR PROPERTY AND CASUALTY COVERAGES 



m 


Premiums 
Written 


Premiums 
Earned 


Losses 
Paid 


Losses 
Incurred 


W/P 
Loss Ratio 


E/I 
Loss Ratio 


Fire 


77,832 


78,097 


35,362 


39,393 


45.4 


50.4 


Allied Lines 


27,191 


26,377 


15,014 


10,722 


55.2 


40.7 


Home Owners 


405,677 . 


386,801 


173,611 


179,674 


42.8 


46.5 


Commercial 
Multi-Peril 


226,317 


221,875 


99,975 


129,672* 


44.2 


58.4 


Inland 
Marine 


72,662 


70,758 


33,929 


41,583 


46.7 


58.8 


Workers 

Compensaiion 
Auto No Fault 

(Private Passengers) 


471,796 
47,335 


456,489 
44,592 


312,780 
29,751 


409,579 
35,228 


66.3 
62,9 


89.7 
79.0 


Auto No Fauit 
(Commercial) 


4,209 


4,030 


2,854 


2,725 


67.8 


67.6 


Auto liability 
(Private Passengers) 


571,620 


534,349 


338,071 


402,113 


59.1 


75.3 


Auto Liability 
(Commercial) 


146,117 


139,225 


77,439 


105,802 


53.0 


76.0 


/\uiu ru) Mwy L/diUdKv 

(Privale Passengers) 


492,735 


469,515 


311,691 


320 , 734 


63. 3 


68. 3 


Auto Physical Damage 
(Commercial) 


98,006 


95,736 


49,787 


52,354 


50.8 


54.7 


Other Liability 


195,511 


196,816 


83,359 


129,685 


42.6 


65.9 



(000) Omitted 



-41- 



COMMONWEALTH OF MASSACHUSETTS 
DIVISION OF INSURANCE 
ANNUAL REPORT 
1982 



State Librsr- issachusetts 
State house, Boston 



COMMONWEALTH OF MASSACHUSETTS 
DIVISION OF INSURANCE 
ANNUAL REPORT 
1982 



-lication # 13542-44-100-2-84-CR 

roved by Daniel Carter, State Purchasing Agent 



3(o% M3 




HAEL J. SABBAGH 

SSlONER OF INSURANCE 



In accordance with Section 17 of Chapter 175 of the Massachusetts 
General Laws I hereby report to the Governor and the General Court the 
official transactions of the Division of Insurance for 1982. 



Michael J.' dabfeagh J 
Commissioned of Insurance 



TABLE OF CONTENTS 



I. HIGHLIGHTS 
II. SECTIONAL SUMMARY 

Administration 3 

Revenue, expenditures, employee count 3 

Fee Schedule 5 

Consumer Service 7 

Financial Surveillance 8 

Company Activity 8 

Foreign Companies licensed 9 

"b" Reinsurers and Surplus Lines 13 

Mergers and name changes 13 

New corporations 15 

Legal 16 

Laws 17 

Regulations 18 

Decisions 18 

Consent Orders 19 

Receiverships 21 

Licensing and Field Audit 23 

Agents and Brokers Licensing 23 

Agents and Brokers Examinations 24 

Life Companies Examined 26 

Property & Casualty Companies Examined 27 

Health Companies Examined 29 

Retirement Systems Examined 31 

Fraternal Organizations Examined 32 

Life Valuation Fees 33 

State Rating Bureau 34 

Policy Forms 36 

III. SUMMARY OF MASSACHUSETTS MAJOR PROPERTY AND CASUALTY COVERAGE 38 

IV. SUMMARY OF MASSACHUSETTS ACCIDENT AND HEALTH INSURANCE EXPERIENCE 39 

V. SUMMARY OF MASSACHUSETTS DIRECT PREMIUMS AND NUMBER OF POLICIES ISSUED 
AND IN FORCE FOR THE MAJOR LINES OF LIFE INSURANCE 40 



I. HIGHLIGHTS 
Merit Rating Surcharges 

The Commissioner adopted a new merit rating surcharge table which in- 
creased auto insurance surcharges assessed to drivers who repeatedly cause 
accidents or violate the motor vehicle laws. Particular attention was paid 
to increasing surcharges for drivers convicted of Driving Under the Influence. 
A driver convicted for the second time for D.U.I, is assessed a $1,000 surcharge 
on his or her policy, as opposed to a $425 surcharge under the old system. 
Surcharges for at fault accidents and other moving violations were also increased 
under the new regulation in an effort to persuade repeat offenders to change 
their poor driving habits. 

Settlement Agreement 

The Commissioner reached an agreement with Bankers Life and Casualty 
Company of Chicago, Illinois, after an extensive investigation by Division 
personnel into alleged acts of deception and misrepresentation in the sale of 
certain life insurance policies by agents of the company. Part of the Settlement 
Agreement included a $50,000 reimbursement to the Division for the cost of the 
investigation. Procedures established for review of policyholders' complaints 
also indicated that the refund of premiums to policyholders would approach one 
million dollars. The agreement is the largest such settlement ever negotiated 
between the Division and an insurer. 

Auto Rates 

Rate setting for auto insurance premiums for 1983 was the last administrative 
action of 1982. The parties for the hearing submitted rate recommendations 
which ranged from 2.5% to 19.4%. The Commissioner established overall rate levels 



only slightly greater than the prior year. The 3% rate hike was the smallest 
increase since 1979. This modest increase was offset for many drivers by 
a $20 per vehicle merit rating credit, the largest credit since the 
inception of the program in 1976. 



2 



II. SECTIONAL SUMMARY 



THE ADMINISTRATION SECTION 

Administration is responsible for providing support services for the Division 
of Insurance, the Board of Appeal on Motor Vehicle Policies and Bonds, and the 
Auto Damage Appraiser Licensing Board. Services, such as; payroll, personnel, 
budget, revenue receipt, accounting, purchasing, and data processing are some 
of the major responsibilities of the section. 
Fiscal Matters 

The following is a five year accounting of Departmental revenue, expenditures, 
and average number of employees: 

Average 
Number of Employee s-CY 

132 
166 
185 
193 

233 

ssessments of $3,203,25! 

levied against insurance companies in 1982 for the "FY81" operating expenses of 

the following Agencies and Commissions: 

Fire Fighting Academy $ 581,619 

Merit Rating Board 1,839,681 

Attorney Gneral/ Consumer Division 167,981 

State Rating Bureau 470,276 

Medical Malpractice Commission 108,862 

Special Commission on Automobile Insurance 34, 834 

$3,203,253 

*The Fiscal 82 revenue amount of $10,213,650 was raised via the following 
schedule : 



Year 


Revenue - FY 


Expenditures - FY 


1982 


10,213,650* 


3,394,199 


1981 


8,193,176 


3,339,305 


1980 


7,863,697 


3,697,675 


1979 


7,131,152 


3,712,000 


1978 


5,852,857 


3,911,477 


*The 


Fiscal 82 revenue amount 


of $10,213,650 includes 



3 



1 



Data Processing 

Data processing services were required for the following Departmental re- 
sponsibilities. 

1. Agents/licensing and file updates 

2. Retirements /verification of calculations 

3. Company/licensing and certificates of authority 

4. Financial Surveillance /management reports 

5. Consumer Services /case counts and management reports 

6. Personnel/employee records 

7. Damage Appraiser /licensing 

It should be noted that considerable system planning was devoted to the auto- 
mation of the functional responsibilities of the Board of Appeal. As of the close 
of 1982, these efforts were ongoing. Considerable system planning, programming 
and testing time, was also expended in the automation of the retirement verification 
functions. At the close of the year, the automation of the retirement verification 
function was operational and in production. The responsibility for retirement 
verification, however, has been transferred from the Division to the new Public 
Retirement Board. 
Special Assignment 

In addition to the routine administrative functions handled by this section, on 

occasion special assignments are undertaken. For example, twenty eight (28) insurers 

were examined during the year for compliance with the Standard Merit Rating Plan. 

The following is a list of those companies audited: 

Aetna Lumber Mutual 

Aetna Casualty & Surety Metropolitan Property and 

Allstate Liability 

American Mutual/American Polichyolders Norfolk and Dedham 

Central Mutual Peerless 

Commercial Union Reliance 

Firemens Fund Royal 

General Accident Safety 

Great American St. Paul Fire and Marine 

Hartford Sentry 

Holyoke Mutual State Farm 

Home Travelers 

Insurance of North America United States Fire and Marine 

Liberty Mutual Utica Mutual 



Six (6) of the twenty eight (28) company audits were closed after a follow-up 
review of the examiner's findings. 



FEE SCHEDULE 
Companies & Other Organizations 



Annual Statement: 



approved B. reinsurer $100 

approved surplus lines 100 

foreign companies 100 

fraternals 5 



Certificate 



annual statements ^ 10 

authority domestic Cos 10 

section 70/71 10 

reports of examination 10 

reading charges 5 

Charter (amendment) 50 

Charter (admission) 100 

Examination (prior to licensing) 300 



License 



company 100 

fraternal benefit society 20 

motor clubs (on admission) 150 

rating bureaus 25 

special authority (stock - mutual) 25 



Policy form (approval, endorsement, riders) 10 

Service of process 5 

Valuation of life policy 004 per thousand 

Valuation of annuity 004 per thousand 



Producers 



License 



adjuster (fire loss) 150 

adviser 150 

appraisers (motor vehicle) 20 

agent (annual) 18 

agent (fraternal) 5/10 alternate years 

agent (motor club) 20 

broker 150 

broker (special) 100 

Voluntary association (each trustee) 50 

partnership (each partner) 50 

corporation (each solicitation) 50 



Note: some license categories require a testing fee, pa\able directly to E.T.S. 



5 



Assessments 



Retirements varies 

Fire Fighting Academy varies 

State Rating Bureau varies 

Attorney General-Consumer Service varies 

Merit Rating Board varies 

Special Auto Commission varies 

Special Medical Malpractice Commission varies 

Certificates of Finding & Order $ 10 

Copies of records 20/40 per page 

tabulat io 

Fines & Penalties varies 

Merit Rating Appeals 5 

Retaliatory Fees varies 



6 



THE CONSUMER SERVICE SECTION 

Consumer Service has reported that the Springfield and Boston locations had 
74,562 contacts with members of the public. Broken down into working categories, 
this figure represents 63,700 telephone information and service call; 3,712 walk- in 
complainants; and 7800 cases generated through correspondence. 

Massachusetts policyholders received $1,679,362 as a result of their contact 
with this office. These monies represent the following breakdown: $11,144 
premium refund; $905,218 additional recovery; $763,000 claim payments expedited. 
Over 50% of the complaints made to the Department involved areas concerning 
disputes with the claim amount; denials made by the company; or a delay caused 
by a dispute or a misunderstanding between the claimant and the insurer. 

These figures do not begin to evaluate the number of times this section clarified 
and reviewed policy language with a consumer to help him/her understand the 
responsibilities of both the insurer and the insured when a loss occurs. 

We have also reviewed and explained policies and coverage for citizens who 
desire to have a thorough understandning of a policy before purchasing it; or before 
a loss occurs on an existing policy. 

We have sent representatives of the Department to areas undergoing human 
disasters i.e., major fires; a chemical spill causing gaseous clouds where people 
were evacuated from their homes. We are conducting an out-reach program responding 
to the insurance needs of the elderly. The focus here is to alert and educate 
senior citizens and their families regarding medicare and medicare supplement coverage; 
and insurance misrepresentation and fraud. 

The Consumer Service Section serves and educates the citizens of this Commonwealth 
and offers a forum where dissatisfied or uninformed, confused consumers may be made 
whole, may be alerted to their rights, or may be educated to better understand 
policy provisions. 



.1 



Financial Surveillance Section 

The Financial Surveillance Section has the responsibility for monitoring 
insurance companies that are licensed or authorized to transact business in 
the Commonwealth. It is also this section's responsibility to review Health 
Maintenance Organizations. During 1982 two H.M.O. 's ceased to be licensed namely; 
Health Guard Inc. and North Quabbin Health Plan. Health Guard Inc. had never 
commenced business and North Quabbin Health Plan subscribers returned to Blue 
Cross. 

As of December 31, 1982, there were 879 insurance companies authorized to 
transact business in the Commonwealth and 16 Health Maintenance Organizations. 
The kinds of companies in the various categories are as follows: 



Domestic Life 17 

Domestic Property & Casulaty 47 

Domestic Title 2 

Foreign Life 325 

Foreign Property & Casualty 376 

Foreign Title 12 

"b" Reinsurers 60 

Surplus Lines 40 

879 

Health Maintenance 

Organizations 16 



In addition, this section has the ongoing responsibility through the licensing 
area, for issuing licenses to the companies seeking admission to transact business 
in the Commonwealth along with the responsibility of approving mergers and amending 
the licenses of companies seeking broader authority in Mass< chusetts . 



8 



FOREIGN INSURANCE COMPANIES 



During 1982 there were 51 foreign insurance companies licensed by this 
section to transact business in the Commonwealth. 



LICENSED 





FIDELITY SECURITY LIFE INSURANCE COMPANY 


January 14, 1982 
LIFE, ACCIDENT AND HEALTH 




UNITED EQUITABLE LIFE INSURANCE COMPANY 


January 14, 1982 
LIFE, ACCIDENT AND HEALTH 




NATIONAL HEALTH & WELFARE MUTUAL LIFE 
INSURANCE ASSOCIATION, INC. 


January 14, 1982 
ACCIDENT AND HEALTH AND ANNUITIES 
ONLY 




FIDELITY AND DEPOSIT COMPANY OF MARYLAND 
(formerly F & D Company of Maryland) 


January 1, 1982 
PROPERTY AND CASUALTY 




NATIONAL CHIROPRACTIC MUTUAL INSURANCE COMPANY 


February 1, 1982 
GENERAL LIABILITY 




EQUITABLE LIFE INSURANCE COMPANY OF IOWA 


February 12, 1982 
LIFE, ACCIDENT AND HEALTH 




UNION SECURITY LIFE INSURANCE COMPANY 


February 12, 1982 
LIFE, ACCIDENT AND HEALTH 




MUTUAL SERVICE LIFE INSURANCE COMPANY 


February 22, 1982 
LIFE, ACCIDENT AND HEALTH 


K 


FIRST VARIABLE LIFE INSURANCE COMPANY 


February 22, 1982 
ANNUITIES ONLY 


1 * 


NORTHERN LIFE INSURANCE COMPANY 


March 4, 1982 
LIFE ONLY 


9 



J 



11. 


OCCIDENTAL FIRE & CASULATY COMPANY 
OF NORTH CAROLINA 


March 30, 1983 
PROPERTY AND CASUALTY 






12. 


EQUITABLE AMERICAN LIFE INSURANCE COMPANY 


April 1, 1982 
LIFE, ACCIDENT AND HEALTH 






13. 


THE CELINA MUTUAL INSURANCE COMPANY 


April 1, 1982 
PROPERTY AND CASUALTY 






14. 


EQUITY GENERAL INSURANCE COMPANY 


April 9. 1982 
LIABILITY OTHER THAN AUTOMOBILE 




15. 


UNION FIDELITY LIFE INSURANCE COMPANY 


February 24, 1982 
LIFE, ACCIDENT AND HEALTH 




; 


16. 


ENTERPRISE INSURANCE COMPANY 


May 14, 1982 
CASUALTY INSURANCE 






17. 


UNITED AMERICAN INSURANCE COMPANY 


February 28, 1982 
LIFE, ACCIDENT AND HEALTH 






18. 


MBL LIFE ASSURANCE CORPORATION 


May 19, 1982 
LIFE ONLY 






19. 


GOLDEN RULE INSURANCE COMPANY 


May 19, 1982 
LIFE, ACCIDENT AND HEALTH 






20. 


PAMICO MORTGAGE INSURANCf COMPANY 


May 26, 1982 
CREDIT INSURANCE 






21. 


UNITED INVESTORS LIFE INSURANCE COMPANY 


April 1, 1982 
LIFE ONLY 






22. 


AETNA CASUALTY & SURETY COMPANY OF ILLINOIS 


June 3, 1982 
PROPERTY & CASUALTY 






23. 


NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION 


June 3, 1982 
LIFE ONLY 






24. 


TRANSAMERICA ASSURANCE COMPANY 


June 3, 1982 
LIFE, ACCIDENT AND HEALTH 






1 







THE RELIABLE LIFE INSURANCE COMPANY 


July 1, 1982 

ijirti nKs L. 1 u C N i Pit* u 


lip it T*U 

litALIn 


— 


COLONIAL ASSURANCE COMPANY 


July 1, 1982 
PROPERTY AND CASUALTY 


• 


TRANS PACIFIC LIFE INSURANCE COMPANY 


June 16 1982 
LIFE, ACCIDENT AND 


HEALTH 


J. 


NORTHBROOK LIFE INSURANCE COMPANY 


July 20. 1982 
LIFE, ACCIDENT AND 


HEALTH 




THE STANDARD OF AMERICA LIFE INSURANCE COMPANY 


Julv 20. 1982 
LIFE, ACCIDENT AND 


HEALTH 




REPUBLIC NATIONAL LIFE GROUP COMPANY 


January 1, 1982 
LIFE, ACCIDENT AND 


HEALTH 




REPUBLIC NATIONAL LIFE INSURANCE COMPANY 


January 1, 1982 
LIFE, ACCIDENT AND 


HEALTH 


[2. 


GREAT AMERICAN LIFE INSURANCE COMPANY 


March 31, 1982 
LIFE, ACCIDENT AND 


HEALTH 


p. 


CERTIFIED LIFE INSURANCE COMPANY 


September 7, 1982 
LIFE, ACCIDENT AND HEALTH 


"4. 


PHOENIX LIFE INSURANCE COMPANY 


September 7, 1982 
LIFE, ACCIDENT AND HEALTH 


'5. 


MONY PENSION INSURANCE CORPORATION 


September 7, 1982 
LIFE, ACCIDENT AND HEALTH 


1 


DEPENDABLE INSURANCE COMPANY, INC. 


September 22, 1982 
PROPERTY AND CASUALTY 


"7. 


LIBERTY NATIONAL LIFE INSURANCE COMPANY 


September 22, 1982 
LIFE ONLY 


"•8. 


VIRGINIA SURETY COMPANY, INC. 


June 30, 1982 
PROPERTY AND CASUALTY 



■ 



39. 


CU LIFE INSURANCE COMPANY OF NEW YORK 


October 1, 1982 
LIFE, ACCIDENT AND HEALTH 




40. 


HOME LIFE FINANCIAL ASSURANCE CORPORATION 


October 1, 1982 
LIFE ONLY 


1 


41. 


MONY LIFE INSURANCE COMPANY OF AMERICA 


October 20, 1982 
LIFE, ACCIDENT AND HEALTH 




42. 


FIDELITY STANDARD LIFE INSURANCE COMPANY 


November 19, 1982 
LIFE, ACCIDENT AND HEALTH 


r 


43. 


PIONEER LIFE INSURANCE COMPANY OF ILLINOIS 


November 19, 1982 


■ 


- 




LIFE, ACCIDENT AND HEALTH 




44. 


INTER- STATE ASSURANCE COMPANY, A MUTUAL COMPANY 


November 19, 1982 
LIFE, ACCIDENT AND HEALTH 




45. 


CENTRAL STATES HEALTH & LIFE CO. OF OMAHA 


December 6, 1982 
LIFE, ACCIDENT AND HEALTH 


- 


46. 


USAA ANNUITY AND LIFE INSURANCE COMPANY 


December 6, 1982 
ANNUITIES ONLY 




47. 


MML BAY STATE LIFE INSURANCE COMPANY 


December 6, 1982 
LIFE, ACCIDENT AND HEALTH 




48. 


HOME GUARANTY INSURANCE CORPORATION 


December 15, 1982 
CREDIT INSURANCE 




49. 


INVESTORS EQUITY INSURANCE COMPANY, INC. 


December 15, 1982 
CREDIT INSURANCE 




50. 


MARYLAND CASUALTY COMPANY 


December 20, 1982 
PROPERTY AND CASUALTY 




51. 


MONITOR LIFE INSURANCE COMPANY OF NEW YORK 


December 22, 1982 
LIFE ONLY 









"b" RE INSURERS/ SURPLUS LINE 



The following 5 companies were authorized as a 'V Reinsurer or a Surplus Line 
I APPROVED 



NWNL REINSURANCE COMPANY April 1, 1982 

"b" REINSURER 



NUTMEG INSURANCE COMPANY April 22, 1982 

SURPLUS LINE COMPANY 



THE SOUTH BRITISH INSURANCE COMPANY LIMITED 


April 22, 1982 
"b" REINSURER 


HANESCO REINSURANCE COMPANY 


December 1, 1982 
"b" REINSURER 


ADMIRAL INSURANCE COMPANY 


December 10, 1982 
"b" REINSURER 


NAME CHANGES /MERGERS 
The following 19 companies changed their name or merged into a new corporation: 


NORTHERN NATIONAL LIFE INSURANCE COMPANY 


Effective January 1, 1982 name 
changed to MANHATTAN NATIONAL 
LIFE INSIRANCE COMPANY 


STANDARD LIFE INSURANCE COMPANY OF INDIANA 


Effective January 1, 1982 name 
changed to INA STANDARD LIFE 
INSURANCE COMPANY 


•COLONIAL PENN INSURANCE COMPANY 


Effective January 1, 1982, the company 
merged into COLONIAL PENN 
INSURANCE COMPANY OF PHILADELPHIA 



COLONIAL PENN INSURANCE COMPANY OF PHILADELPHIA Effective January 1, 1982 the company 

changed its name to COLONIAL PENN 
INSURANCE COMPANY 



FIDELITY AND DEPOSIT COMPANY OF MARYLAND Effective January 1, 1982 company merged 

into FIDELITY & DEPOSIT COMPANY OF 
MARYLAND (formerly F & D Company of 
Maryland) 



6. 


UNION FIDELITY LIFE INSURANCE COMPANY 


Effective February 24, 1982, the company 
merged into UNION FIDELITY LIFE INS . CO., 
formerly Combined Fidelity Life Ins. Co. 


7. 


INSURAMERICA CORPORATION 


y 

Effective February 16, 1982, company chan, 
its name to GREAT-WEST LIFE & ANNUITY 
INSURANCE COMPANY 


8. 


UNITED AMERICAN INSURANCE COMPANY 


Effective February 28, 1982, company mergl 
into UNITED AMERICAN INS. CO. 


9. 


UNITED INVESTORS LIFE INSURANCE COMPANY 


Effective April 1, 1982, company merged 
into UNITED INVESTORS LIFE INS. CO. 
(formerly United Merger Ins. Co.) 


10. 


MEDICAL INDEMNITY OF AMERICA, INC. 


Effective June 8, 1982, the company name 
changed to BCS INSURANCE COMPANY 


11. 


NN PROVIDENCE LIFE INSURANCE COMPANY 


Effective May 18, 1982, company changed i 
name to PROVIDENCE LIFE INSURANCE COMPANY 


12. 


REPUBLIC NATIONAL LIFE INSURANCE COMPANY 


Effective January 1, 1982, Company's Chai 
dissolved. Ordinary business reinsured 
with Republic National Life Ins. Co. 
(XYZ Life Ins. Co.) and Group business 
reinsured with REpublic National Life Grc 
Company. 


13. 


GREAT AMERICAN LIFE INSURANCE COMPANY 


Effective March 31, 1982, Company merged 
into GREAT AMERICAN LIFE INS. CO., 
Cincinnati, Ohio. 


14. 


VIRGINIA SURETY COMPANY, INCORPORATED 


Effective June 30, 1982, company merged 
into VIRGINIA SURETY COMPANY, INC. (forme 
Dearborn Cas. Ins. Co., Chicago, ILL. 


15. 


EQUITABLE GENERAL INSURANCE COMPANY 


Effective September 29, 1982 name changed 
to GEICO GENERAL INSURANCE COMPANY 


16. 


HEALTH SERVICE, INCORPORATED 


Effective May 26, 1982, company changed 
its name to ICS LIFE INSURANCE CO. 


17. 


ZURICH LIFE INSURANCE COMPANY 


Effective December 1, 1982, the company 
changed its name to DREYFUS LIFE INSURANC 
COMPANY 



CI 



Bf 



14 



lL CITY TITLE INSURANCE COMPANY 

j 

J. PIONEER NATIONAL TITLE INSURANCE COMPANY Effective December, 1982 name changed 

to TICOR TITLE INSURANCE COMPANY 



During 1982 the section has the responsibility of forming a new domestic 
crporation: 

BARNSTABLE COUNTY INSURANCE COMPANY Authorized on May 6, 1982 



Effective December 1, 1982, company 
changed its name to NATIONAL ATTORNEYS 
TITLE INSURANCE COMPANY 



,1 



15 



THE LEGAL SECTION 

During 1982, the Legal Section which includes the Special Investigation staff 
acted as prosecutor In 35 administrative actions against companies, agents, brokers, 
and motor vehicle damage appraisers. These actions sought the suspension or 
revocation of licenses and the imposition of monetary penalties. The staff also 
represented the Division at other types of administrative hearings. 

The Section referred 8 civil and criminal cases to county, state, and federal 
law enforcement agencies and assisted in their preparation. Further, the Section 
aided the Office of the Attorney General on 25 court cases in which the Commissioner 
of Insurance was a defendent. 

An extensive investigation into alleged acts of deception and misrepresentation 
in the sale of certain policies of life insurance by agents of The Bankers Life and 
Casualty Insurance Company of Chicago Illinois monopolized much of this section's 
time . 

This work, however, resulted in the largest settlement agreement ever negotiated 
between the Division and an insurer. Part of the Settlement Agreement involved a 
$50,000 payment to the Division by Bankers for costs of the investigation. Procedures 
established for review of policyholders' complaints by the Division and Bankers 
also indicated refund of premiums would approach one million dollars. 

In addition, a substantial portion of the Section's time was devoted to serving 
the legal needs of other sections within the Division. Services typically included 
assisting the Consumer Services staff and advising the Financial Surveillance, Policy 
Approval, Retirement Systems and Agents and Brokers staffs. Numerous inquiries 
from insurance companies, agents and brokers, the public, and governmental agencies 
were answered. 

The following laws, regulations, decisions, consent orders and receiverships alsc 
received considerable attention by this Section. 

1 6 



ws 

Chap. 129 - An act relative to membership on the governing committee of 
the Massachusetts Motor Vehicle Reinsurance Facility 

Chap. 150 - An act further regulating the penalty for fraudulent insurance 
claims. 

Chap. 174 - An act relative to rate manuals for motor vehicle insurance 

Chap. 180 - An act further amending the law concerning membership on the 

governing committee of the Motor Vehicle Reinsurance Facility. 

Chap. 249 - An act further regulating the investments of life insurance companies. 

Chap. 275 - An act authorizing student education loans as part of certain life 
insurance policies. 



Chap. 276 - An act relative to savings bank life insurance - maximum amounts of. 



Chap. 280 - An act further regulating the standard form of fire insurance 
policies . 



Chap. 318 - An act relative to life insurance company separate accounts. 

Chap. 334 - An act relative to the standard form of fire insurance policies. 

Chap. 371 - An act relative to commissions paid to independent agents and 
brokers . 

Chap. 425 - An Act relative to investments of life insurance companies 

Chap. 436 - An act relative to the membership of the group insurance commission. 

Chap. 439 - An act relative to the conditions for admission of foreign life 
insurance companies. 

Chap. 472 - An act further regulating real estate investment limits by life 
insurance companies. 

Chap. 526 - An act increasing the amount of insurance on the purchase of a 

new or used motor vehicle on debtors of a bank, association, financial 
or other institution. 

Chap. 576 - An act further defining an insurance broker and insurance agent. 

Chap. 595 - An act further regulating legal services plans of insurance. 

Chap. 615 - An act relative to ;»roup insurance coverage for employees of 
Worcester County. 

Chap. 618 - An act relative to the standard valuation of life insurance policies. 



J 



17 



Chap. 640 - An Act authorizing aunicipal electric departments to establish 
self -insurance trus : funds. 

Chap. 648 - An act further regulating additional group life insurance for both 
active and retired employees of the Commonwealth. 

Chap. 665 - An act further regulating the licensing of insurance agents and 
brokers by requiring continuing education. 



REGULATIONS 

211 CMR 79.00 Standard Merit Rating Plan. 



DECISIONS 
Docket # 

E81-12-4 Statement of facts, Findings and Decision, and Decision on Appeal 
re Alfred A Ricci, Jr., resul:ing in denial of issuance of license. 

82-2-1 Opinion, Findings, and Decision regarding Blue Cross/Blue Shield 

Medex Rates. 

R82-3-4 Filing by the Massachusetts Motor Vehicle Reinsurance Facility of 

proposed changes to Rule 14 of the Rules of Operation, and removal 
from consideration of the changes to Rule 14. 

82-2-4 Decision granting preliminary approval of the plan to convert 

Worcester Mutual Insurance Company form a mutual to a stock insurance 
company. 

82-4-1 Decision on Appeal of Opinion, Findings, and Decision regarding Blue 

Cross/Blue Shield Medex Rates. 

82-3-3 Report to the Commissioner of Insurance Relative to the sufficiency 

of Competition with Respect to Automobile Insurance Rates. 

E82-5-5 Approval of Sale of Townline Insurance Agency to the partners of 

the Sculos and Santilli Insurance Agency. 

R82-8-1 Filing of amendment to Rule 6. 2, a, Garage Insurance, by the Massa- 

chusetts Motor Vehicle Reinsurance Facility. 

82-8-3 Filing of amendment to Rule 18, A, 2, Servicing Carrier/Designated Broker 

Responsibilities, by the Massachusetts Motor Vehicle Reinsurance Facility 

A82-12-1 Settlement reached re Worker's Compensation Appeal - Cambridge Packing 
Company, Inc. 



18 



A82-12-2 



Settlement reached re Worker's Compensation Appeal - Mike Gendreau 
d/b/a. Mike's Welding Home Indemnity Company. 



E82-9-1 Settlement Agreement re Bankers Life and Casualty Company of 

Chicago, Illinois. 

R82-3-1 Opinion, Findings and Decision re Worker's Compensation Rates, 

and Decision on Appeal of Opinion, Findings and Decision re 
Worker's Compensation Rates. 

A82-6-3 Decision and Order on Appeal of Aetna Casualty and Surety Company 

Concerning Designated Broker Bette Zaharris. 

R82-5-1 Decision and Order Concerning Proposed Rule 18E of the Massachusetts 

Motor Vehicle Reinsurance Facility. 

82-11-2 Decision Concerning the Acquisition of Control of Massachusetts 
Indemnity and Life Insurance Company, a Subsidiary of Penncorp 
Financial, Inc., by American Can Company. 

82-10-1 Decision and Order re Massachusetts Motor Vehicle Reinsurance 

Facility Rule change - proposals to amend Article I - Rule 4B, 
Article I - Rule 4D(2), Article AD(1) and Article VII 

82-7-4 Decision and Order Concerning Proposed Amendment to Facility Rule 

of Operation 18(C)(2)(d). 

82-10-2 Decision Concerning Application of Blue Cross of Massachusetts, Inc., 
and Blue Shield of Massachusetts, Inc., for Approval of Proposed 
Quarterly Non-Group Rates. 

82-11-1 Opinion, Findings, Conclusion and Order re 1982 Medical Malpractice 

Insurance Rates. 

82-12-7 Approval of Rules and Procedures for Disability Retirements of 
:he Retirement Board, State - Boston Retirement System. 

82-1-1 Investigatory Hearing Relative to a Group Mortgage Protection Life 

Insurance Plan Made Available by Phoenix Mutual Life Insurance 
Company to Massachusetts Residents. 

82-7-6 Opinion, Findings, and Decision on 1983 Auto Insurance Rates. 



CONSENT ORDERS 
Docket # 

E82-2-2 RE: American Agency Life Insurance Company, T.M. Insurance Agency, Inc., 

of Massachusetts, David B. Lea, Jr., and Edward R. Anderson - 
Agreed Settlement and Consent Order resulting in assessment and 
compliance with terms of Commissioner. 



19 



E81-11-1 RE: Michael A. DiGregorio - Findings of Facts, Order and 
Decision resulting in revocation of license. 

E82-4-2 RE: William D. Goodwin - Revocation of all licenses to do 

any insurance business in Massachusetts 

E82-5-3 RE: Lawrence W. Walsh and the L.W. Walsh Insurance Agency, Inc., 

- Findings of Fact and Consent Order resulting in revocation 
of all licenses. 

E82-5-4 RE: Stanley Kozaczka d/b/a New Main St. Insurance Agency - Assess- 

ment and fine for charging unauthorized administrative fees. 

E82-6-2 RE: Mottard Insurance Agency et al. - Assessment and fine for 

charging unauthorized administrative fees. 

E82-7-2 RE: Charles Zaharris - Revocation of all licenses to do any 

insurance business in Massachusetts. 

E82-2-3 RE: Frank D. Messina - Suspension of broker's license. 

E82-7-3 RE: Anthony C. Camerota d/b/a TKO Insurance Agency and John E. McDonald 

Insurance Agency - Assessment and Settlement Agreement. 



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22 



LICENSING & FIELD AUDIT SECTION 

This Section comes under the responsibility of the Second Deputy Commissioner 

of Insurance. It consists of the following sections: 

Agents and Brokers Licensing 
Agents and Brokers Examinations 
Field Audit Section 
Retirement Section 
Fraternal Section 

Agents and Brokers Licensing - This Section is responsible for the licensing 
of all agents, brokers, special brokers, corporations, insurance advisers and fire 
loss adjusters. The responsibility of this Section also includes the examination 
of license applications, issuance and renewal of licenses to qualified applicants and 
maintenance of the records of tha licenses. 

The testing of all applicants for Insurance Advisers and Fire Loss Adjusters is 
done directly by this Section. 

The testing of all agents and brokers is done by Education Testing Service 
of Princeton, New Jersey. ETS i5 under contract with the Division to prepare these 
tests under the supervision of the Commissioner to administer them and report the 
results . 

During 1982, a total of 23,642 new applications for agents' and brokers' licenses 
were processed and issued; and 85,539 agents' licenses were renewed; 16,125 agents' 
licenses were cancelled; also, a total of 216 new Fraternal Agents' licenses were 
issued. 

The following statistics represent the number of other licenses issued during 
1982, by this section: 

Individual and Trade Names - renewal and 

new licenses issued 10,280 
Corporation Licenses renewed 1,512 



23 



Special Brokers Licenses renewed and 

new licenses issued 259 

Partnership licenses issued or renewed 272 

Insurance Advisors licenses issued or renewed 296 

Fire Loss Adjusters licenses issued or renewed 58 
The following exhibit shows the number of examinations given by Educational 
Testing Service. 

The number of applicants taking one or more tests was approximately 7,023. 



Type of Exam No . Taken No. Passed No. Failed % Passed 

Life 3,440 2,548 892 74% 

Accident & Health 3,157 1,863 1,294 50% 

Property 1,487 961 526 64.8% 

Casualty 1,592 964 628 60.5% 

Totals 9,676 6,336 3,340 62,3% 



Agents and Brokers Examinations - This Section is responsible for the examination 
of insurance agencies and the investigation of certain complaints assigned to it, the 
review of applicants for Designated Brokers to the Massachusetts Automobile Reinsurance 
Facility, responsibility for the collection of the 4% tax on all surplus lines business 
placed by Special Brokers; also, the supervision of Automobile Clubs licensed by 
this Division. 

The following exhibit shows the projects completed by this section during 1982: 



Agency Examinations 19 
Insurance Matters Investigated 16 
Facility Applicants Investigated 54 
Facility Applicants Licenses Reviewed 136 

*4% Surplus Lines Premium Tax Collected $2,197,612 

*As of April 1, 1983 



24 



Field Audit Section - This Section is responsible for all examinations done in 
the field of both Life, Property and Casualty Insurance Companies, Blue Cross 
and Blue Shield, Retirement Systems, Fraternal Organizations organized under 
Chapter 176 of the Massachusetts General Laws, also the yearly policy evaluation 
for all Domestic Life Insurance Companies. The following exhibits show the 
examination completed in 1982 by this section and those in progress as of December 31, 
1982: 



25 





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29 



•etirer.er.t Section This Section has the statutory responsibility 
fjr computing all pension allowances granted by the individual 
"etiremer.t Systems as established by Chapter 32 of Massachusetts 
General Lavs; also, various fonts of assistance and guidance is 
riven to these ' systems by -the Director of this section and his 
staff 

The Section also makes an annual evaluation of the assets and 
liabilities of each of the 104 systems, in order that a determination 
may be made as to the amount of the appropriation that is required 
from its respective city or town to finance the cost of the system. 
It must also calculate the amount of expenses each system is 
required to pay to reimburse the Commonwealth for its expenses 
incurred in relation to the supervision conducted by this section 
over the retirement systems. 

It also determines the annuity reserve of each system to determine 
if there is a deficit or surplus in its funds. 

It also calculates interest rates which are utilized in the various 
retirement systems. 

Chapter 650 of the Acts cf 1952 created a Division of Public Employee 
Retirement Administration within the Executive Office of Admin i strati 
and "Finance. This act removed the Retirement Section from the Divisl 
: f Insurance. 



30 



RETIREMENT SYSTEMS 



EXAMINED IN 1982 
RETIREMENT SYSTEM ASSETS SURPLUS 



Berkshire County 


S6, 596 


,253 


$284 


915 


Franklin County 


5,352 


,579 


173 


097 


TOTAL - COUNTIES 


S9,928 


,852 


$458 


010 


* A o - — 


CI A 7 7 


i jDO 


C A O 

J) 6y 


1 y 5 


j\t l in g l on 


in r \ r 

J. U , O J O j 


a -1 n 

Oil) 




n 7 7 


AlJlCi 


1 , Z / H 


7 ,1 Q 


4 


, J 69 


Bo S t DTI 


j ji , l. y / 


c c n 


O AO" 

8,98- 


,710 






"^Q 7 

j 3 / 


7 R 7 


1 R 7 
J. / 


un ± cope e 




1Z j 


7 A C 
/ O . 


U jU 


p Q C ^ PI Q T~* 7™* T" C\ T"& 

£,<iZ> L ridJ-ip LUJ1 


? 1 1 R 

. . 1 i o 


UH J. 


Q 1 
y i 




roll DtA-£»T- 

rai i ki\ er 


7 n i l q 
z u , 1 1 y . 


q 7 n 


A 7 R 
Z o . 


n n o 
u u y 


r l icnDurg 


C 7 

o , y / y 


1 U 


7 on 
.5 U 


IOC 
1 U 


breaker Ld.v,rence oan. uisirici 


7 A Q 

z o y 


, o U 


1 u . 


7 A s 
/ .5 


Holyoke 


15,324. 


000 


601, 


095 


Maynard 


1,437. 


754 


5 7 


036 


Montague 


1 .. 238 , 


756 


62. 


296 


Springf ield 


41,416 


410 


981 , 


747 


Taunton 


9 . 192 


610 


5 3 7 


2 53 


TOTAL - CITIES, TOKNS 
AND DISTRICTS 


$481, 297 


911 


S14 , 198 


575 


GRAND TOTAL 


S491 ,226 


743 


514,656 


585 



31 



Fraternal Section - This Section is responsible for auditing all annual 
statements filed by both Domestic and Foreign organizations operating under 
Chapter 176 of the Massachusetts General Laws, also, the dissolution of Fraternals 
operating under Sections 45 and 46 of Chapter 176 of the Massachusetts General 
Laws. It also has the responsibility for approval of all changes in bylaws and 
purposes. Also, the staff gives assistance and guidance to the officers of the 
organizations. 

As of December 31, 1982, there were 167 organizations operating under 
Section 45 and 101 organizations operating under Section 46 of Chapter 176 
of Massachusetts Gneral Laws; also, there were 3 Domestic Fraternals and 37 
Foreign Fratenals operating under the Lodge System licensed to do business in 
the Commonwealth of Massachusetts. 

FRATERNAL O RGANIZATIONS EXAMINED IN 1982 
LODGE S ASSETS LIABILITIES SURPLUS 

Supreme Council of the Royal Arcanum $30,491,538 $21,118,022 $9,373,516 



32 



LIFE INSURANCE VALUATION FEES 



The following schedule shovs the valuation fees collected in 
1 9 SI on 19S1 business. These fees are collected in accordance 
with Section 14, Chapter 175 of the Massachusetts General Lavs. 

In addition, the Valuation Unit, which is made up of examiners 
of the Field Audit Section, in accordance with the Statutes as 
cited above collected S9,6S0 for certificates issued in connection 
vith the valuation of life insurance company reserves. 



.-y. LIFE INSURANCE 


S5 *n" 


.75 


ASSUMPTION 


7 5S 


.07 


BERKSHIRE LIFE 


12,760 


.06 


BOSTON" MUTUAL LIFE 


25,912 


.44 


JOHN EAKCOCK MUTUAL LIFE 


604 ; 264 


.94 


JOHN EANCOCK VARIABLE 


2,546 


.83 


LIBERTY LIFE 


20,645 


.58 


LIFE CF AMERICA 


- 59 


.18 




y -J *T «, 


^ 


MASS. INDEMNITY AND LIFE 


57,692 


.14 


MASS. MUTUAL LIFE 


229,067 


.62 


MONARCH LIFE 


11,474 


.97 


NEK ENGLAND MUTUAL LIFE 


142,171 


.62 


PATRIOT GENERAL LIFE 


1,078 


.08 


PAUL REVERE LIFE 


24,976 


.50 


PAUL SEVERE VARIABLE 


2, IIS 


.54 


STATE MUTUAL LIFE 


69,S94 


.77 


UNITED EDUCATORS 




.28 


COOFERAXT'S 


211 


.17 


TOTAL 33 


SI, 215,652 


.42 



THE STATE RATING BUREAU 



Late in 1975 the Massachusetts Legislature enacted Chapter 728 
establishing a State Rating Bureau in the Division of Insurance 
and providing for the first time a strong complement of professional 
actuaries. In 1982 the newly legislated positions of Life Actuary 
and Assistant Life Actuary were filled. 

The State Rating Bureau is divided into the Rating Section and 
The Policy Forms Section. The Rating Section is responsible for 
rate regulation of automobile, homeowners, Blue Cross/Blue Shield, 
Health Maintenance Organizations, workers' compensation and other 
insurance premiums. They are also responsible for the design and 
monitoring of rating statistical plans and for the examination of 
rating bureaus . 

The Policy Forms Section is responsible for the verification of 
compliance "with the life insurance non- forfeiture laws and valu- 
ations of life insurance reserves. Review and approval or dis- 
approval of various insurance policy forms is also the responsi- 
bility of the Policy Forms Section. 



i 



During 1982, the following items were handled by the SRB: 

1. Automobile Rates for 1983 - The SRB prepared a filing 
for 1985 rates which proposed an increase substantially 
below that which was proposed by the industry. The 
preparation of this filing was a major effort involving 
in-depth research with regard to every facet of the 
ratemaking process. Also involved was a thorough analysis 
of the industry filing, a technical document of over 500 
pages. The SRB definded its filing during the rate 
hearing process which lasted several weeks. During the 
hearings, members of the SRB gave extensive testimony 

as expert witnesses regarding the various filings. 
Automobile insurance will generate premiums of over ' 
one billion dollars in 1981. 

2. Medical Malpractice - The SRB has been involved in the 
annual process which results in the establishment of 
Medical Malpractice rates. 

3. Workers 1 Compensation Revis ions - A general rate revision 
in Workers * Compensation rates was reviewed. There is over 
$500 million of Workers' Compensation Insurance premium. 
The State Rating Bureau witnesses provided expert testimony 
at the rate hearing. The filing of the Insurance Industry 
for over a 30% increase was disapproved based on that 
expert testimony. 

4. Blue Cross/Blue Shield - Public hearings were held on rate 
increase requests of Blue Cross and Blue Shield (The Blues) 
for Medicare Supplement and non-group plans. The State 
Rating Bureau provided expert testimony. 

5. Merit Rating Surcharges : Provided expert testimony that led 
to the raising of surcharges for second and subsequent 
offenses. 

6. Homeowners : A review of the Insurance Industries experience 
led to a reduction in Homeowners rates for many consumers. 

7. Surcharged Reinsurance : Proposed rates for a possible 
surcharged reinsurance program for Private Passenger 
Automobile. Such a program would charge bad drivers more 
allowing good drivers to pay less. 

8. Commercial Automobile : Provided competitive Commercial 
automobile rate information for a buyers guide. Continued 
to review competitive rate filings. 

9. Pensions : Calculated the appropriation for the 96 State, 
County, and Town Boards of Retirements. 



i 



Policy Forms Section 

The Policy Forms section reviewed over 1,600 forms and over 
3,000 rate filings in the Property and Casualty Insurance area. 

Also, 1,400 Individual Accident and Health .forms were approved, 
while 500 were disapproved. Three hundred group health forms 
were approved, while 150 were disapproved. In addition, 340 
Accident and Health rate filings were accepted, while 80 were 
disapproved. 

Two thousand three hundred individual life and annuity forms were 
approved, while 260 were disapproved. One thousand four hundred 
group life and annuity forms were approved, while 270 were 
disapproved. 

The Life Actuarial Section is responsible for the actuarial 
examination of individual life and annuity forms submitted for 
approval and issuance in the Commonwealth of Massachusetts by 
seventeen domestic and two hundred seventy-eight foreign life 
insurance companies. It ensures that the benefits not only 
meet the minimum requirements of our General Laws, but that 
they are calculated in accordance with the method, interest 
rate assumptions, and mortality tables, as specified in the 
policy. 

As major innovations are taking place in the life insurance 
industry, more complicated policies are submitted for approval. 
In addition to reviewing variable life forms (where benefits 
are based on the investment experience of a separate account); 
adjustable life (where coverage may be adjusted upward or 
downward as insurance needs and capabilities dictate); flexible 
premium non-par forms (where an insurer is allowed to prospec- 
tively reduce premiums below the "maximum guaranteed premium" 
based upon current expectations of future experience - necessary 
for stock companies to compete in long-term net cost with parti- 
cipating policies in these economic times) ; universal life and 
hybrid universal life products w r ere examined and given actuarial 
clearance. 

During 1982 three domestic mutual companies (New England Life, 
iVassachusetts Mutual, and Assumption) and one domestic stock 
company (John Hancock Variable Life) submitted universal life 
forms whicn were reviewed and approved. Universal Life unbundles 
the protection, savings, and expense components of life insurance. 
The product's flexible premium payment structure and the insured's 
ability to increase or decrease the death benefit offer significant 
advantages to the insured. It is the treatment of the cash value 
that separates universal life from traditional whole life contracts 
The cash values are calculated monthly by a retrospective formula. 



I 



36 



Chapter 334 (effective October 10, 1982) amended Sections 9 
and 144 of MGL CHI 75 by implementing the 1980 Amendments to 
the Standard Valuation and Nonforfeiture Laws adopted after 
1980 by the National Association of Insurance Commissioners. 
The anended statutes allow new policy filings under more 
up-to-date mortality tables. The changes made are extensive 
and dramatic, but the amended laws are more suitable for current 
conditions under which new products may be issued, and are more 
directly responsive to new conditions which may develop in the 
future, without the need for further consideration by the State 
Legislature . 

In addition to the new mortality rates, a radical change in 
the interest rate for the calculation of reserves and non- 
forfeiture values is defined in this law. The maximum interest 
rates depend on the economic index of the Moody's Corporate 
Bond Yield Average - Monthly Average Co'rporates, as published 
by Moody's Investors Service, Inc. This "dynamic" interest 
basis is recalculated at twelve month intervals, and is auto- 
matically adjusted if the recalculation produces a significant 
change, thus the maximum interest rates .are adjusted to current 
conditions . 

A new formula for calculating the expense allowance, used in 
the Standard Nonforfeiture Law for Life Insurance, is also 
defined in this law. This formula reflects current patterns 
of expenses. 

As a result of all these changes, it can reasonably be assumed 
that nost insurance companies will make consistent reductions 
in gross premiums. 



i9Sfc- SUMMARY OF MASSACHUSETTS 
MAJOR PROPERTY AND CASUALTY COVERAGES 





Written. 


Premimiis 
.Earned 


Losses 
Paid 


Losses 
Incurred 


W/P 
Loss Ratio 


E/I 
Loss Kal 


Fire 

rirc 


/*», /Ul 


7A 7QA 






HO . J 


45. 5 


Allied Lines 


28,791 


27,945 


9,417 


10,015 


32.7 


35.8 


Home Owners 


439,797 


420,293 


168,334 


174,422 


38.3 


41.5 


Commercial 
Multi-PerD 


231,050 


225,380 


118,257 


114,765 


51.2 


50.9 


Inland 
Marine 


75,366 


72,800 


54,706 


48,327 


72.6 


66.4 


Workers 

Compensarion 
Auto No Fault 

(Private Passengers) 


510,160 
41,199 


494,215 
39,467 


338,565 
28,537 


405,550 
28,732 


66.4 
69.3 


82.1 
72.8 


Auto No Fault 
(Commercial) 


3,242 


3,227 


2,648 


3,309 


81.7 


102.6 


Auto Liability 
(Private Passengers) 


667,952 


628,878 


388,479 


478,740 


58.2 


'76.1 


Auto Liability 
(Commercial) 


156 816 


151,895 


103, 989 


126, 539 


66.3 




Auto Physical Damage 
(Private Passengers) 


563,513 


529,919 


347,998 


350,118 


61.8 


66.1 


Auto Physical Damage 
(Commercial) 


95,724 


92,530 


57,004 


57,900 


59.6 


62.6 


Other Liability 


193,622 


192,344 


93,990 


134,311 


48.5 


69.8 



(000) Omitted 



1981 _ SUMMARY OF MASSACHUSETTS 
DIRECT PREMIUMS AND NUMBER OF POLICIES 
ISSUED AND IN FORCE FOR THE MAJOR LINES OF LIFE JNSURANCE 

Direct Premiums s Policies Issued Policies in Force 



Ordinary 

Credit life (Gr.&lnd.) 

Grrup 
Industrial 

Total Life Insurance Including 
Annuity Considerations - 



790,405 

20,750 
229,103 

1,659 

1,487,039 



13,034,428 

922,925 
6,667,006 

10,901 

20,605,261 



51,597,536 

2,770,709 
54,546,092 

423,478 

109,337,635 



(000) omitted 



1981 — SUMMARY OF MASSACHUSETTS 
ACCIDENT AND HEALTH INSURANCE EXPERIENCE 





Direct 


Direct 


Direct 


Direct ; 


W/P 






Premiums 


Premiums 


Losses 


Losses 


E/i 




Written 


Earned 


raid 


imn cu 


T^oss Ratio 


*^*»» IVJIi 


Group 


- 621,923 


642,898 


512,674 


527,530 


82.4 


82.1 


Credit (Gr. & lnd.) 


7,888 


7,419 


3,591 


3,'42; 


45.5 


46.1 


Collectively 


9,075 


9,550 


6,589 


6,828 


72.6 


71.5 


Renewable 


• 








• 




Non-Cancellable 


41,971 


39,775 


16,290 


23,028 


38.8 


57.9 


Guaranteed 


22,419 


22,833 


14,205 


14,633 


63.4 


64.1 


Renewable 














All Other 


24,094 


23,791 


16,321 


17,944 


67.7 


75.4 


Total ' 


727,368 


746,266 


569,670 


593,384 


78.3 


79.5 



(000) omittad 



State Libre-/ of Massachusetts 
State House, Boston 



division of insurance 



1987 
annual report 



<L.| 



message from the commissioner 



I am pleased to present the 1987 Annual Report of the Massachusetts 
Division of Insurance. 

Since the 1940's, as a result of an Act of Congress, the insurance industry has 
been subject largely to state rather than federal regulation. Over the years, 
the Massachusetts Legislature has granted the Commissioner broad statu- 
tory authority to oversee nearly every aspect of the insurance business. This 
is particularly true with respect to personal lines of insurance including 
motor vehicle, homeowner's, accident and health, and life insurance. 

Insurance, along with banking and securities, has emerged as a diversified, 
complex, multi-national industry and a key component of the burgeoning 
financial services industry. New products and new delivery systems, 
especially in the health care field, regularly appear in the market, requiring 
close scrutiny by state insurance agencies whose primary responsibility is to 
protect the insurance consumer while maintaining a healthy insurance 
environment. 

As the 1990's approach, the challenge to state insurance agencies every- 
where, measured against the backdrop of an increasingly sophisticated 
industry, is to upgrade and augment regulatory abilities primarily through 
the use of modern management information systems, improved service 
delivery, and a continued search for talented and expert staff. 

The Massachusetts Division of Insurance is meeting this challenge. The 
following report will outline the important strides that the Division made in 
1987 as well as those that are planned for the years ahead. 




Sincerely, 



Roger M. Singer 
Commissioner 



table of contents 



Introduction 3 

Division of Insurance Organization Chart 3 

Accomplishments 5-6 

Section Summaries 

Consumer Service Section 7 

State Rating Bureau 7 

Medical Malpractice Analysis Bureau 8 

Agent and Broker Licensing 8 

Board of Appeal on Motor Vehicle Liability Policies and Bonds 9 

Financial Surveillance Section 10 

Motor Vehicle Damage Appraisers Board 10 

Field Audit Section 11 

Health Policy Section 11 

Legal Section 12 

Administration Section 12 

Electronic Data Processing 12 

Cooperative Activities 13 

Division of Insurance Goals for 1988 13-14 

Financial Statement 15 

Appendix 16-17 

Insurance Related Acts and Resolves of 1987 



introduction 



The Massachusetts Division of In- 
surance is charged with protecting 
the insurance consumer in the con- 
text of a healthy and responsible 
insurance market. Its task involves 
a careful balancing of efforts to keep 
insurance costs as affordable as 
possible while making certain that 
insuring entities remain financially 
sound. This is accomplished by a 
combination of ratesetting, policy 
approval, licensing, financial ex- 
amination, investigation and en- 
forcement, regulation, and con- 
sumer assistance. Among the chal- 
lenges the Division has faced during 
the past year, certainly the most 



notable and controversial has been 
in the area of private passenger 
automobile insurance. Massachu- 
setts has strong, consumer-oriented 
automobile insurance laws. At the 
same time, Massachusetts ranks 
first in the nation in claims fre- 
quency and automobile theft, and 
its policyholders pay premiums 
which are among the highest in the 
United States. In 1987, the vitality 
of the Massachusetts automobile 
insurance market was threatened 
when several insurers announced 
plans to cease writing automobile 
insurance. Claiming an inability to 
operate profitably, the companies 



cited inadequate rates as the reason 
for their plans to withdraw. 

These and other events surround- 
ing the private passenger automo- 
bile insurance market in Massachu- 
setts vividly illustrate the need for 
fundamental changes in the current 
system and in the laws that govern 
it. Given the right tools, automobile 
insurance costs can be controlled 
while the stability of the Massachu- 
setts market is ensured. 



division of insurance 
organization chart 



Commissioner's 
Staff 



Administration 



Legal 



Consumer 
Service 
Section 



Special 
Investigations 
Unit 



Hearing 
Officers 



Commissioner 
of Insurance 



First Deputy 
Commissioner 



Board of 
Appeal 



Financial and 
Licensing 



Financial 
Surveillance 



State Rating 
Bureau 



Agents and 
Brokers 



Health Policy 



Medical 
Malpractice 



Policy 
Forms 



Field 




Auto 


Audit 




Damage 




Appr. Board 



3 




"moving in new directions to improve services 
to consumers within the commonwealth today 
and in the future" 




4 



accomplishments of the division of insurance during 1967 



"Assisting those we serve, 
consumers and licensees, with 
improved programs." 

■ $285,296 was recovered by the 
Consumer Service Section for 
consumers who had filed claim 
complaints with the Division of 
Insurance in 1987. 



Based on a plan developed by the 
State Rating Bureau, the 
Commissioner adopted a Low 
Mileage Discount Plan for pri- 
vate passenger automobile in- 
surance in 1987. The plan 
awards drivers who travel less 
than 7,500 miles per year a pre- 
mium discount of up to 10%. 

The Board of Appeal on Motor 
Vehicle Liability Policies and 
Bonds conducted a total of 
32,280 hearings at 14 locations 
throughout the state. These in- 
cluded 29,525 Safe Driver Insur- 
ance Plan surcharge appeals, 
2,567 appeals of decisions of the 
Registrar of Motor Vehicles, and 
188 appeals of automobile insur- 
ance cancellations. 

The staff of the Special Investi- 
gations Unit was expanded to 
four investigators in order to 
combat fraudulent insurance 
practices by insurance compa- 
nies, agents, and brokers. 



The addition of an Electronic 
Data Processing Unit to the Divi- 
sion has enabled the processing 
time for agent licenses to be dras- 
tically reduced to an average of 
three weeks. Prior to automa- 
tion, processing an agent license 
took about nine months. 



■ Prompted by the increasing ina- 
bility of day care facilities and 
other human service organiza- 
tions to obtain commercial liabil- 
ity insurance, a Market Assis- 
tance Plan was developed to as- 
sist human service providers in 
obtaining needed coverage. 

"Meeting the challenges of a 
changing insurance market by 
broadening regulatory activ- 
ity." 

B The private passenger automo- 
bile insurance ratesetting proc- 
ess was amended in 1987, requir- 
ing insurance companies to ad- 
dress cost and expense contain- 
ment issues in their rate filing 
thereby streamlining the hear- 
ing process. 

B The Health Policy Section has 
made marked progress in over- 
seeing health maintenance or- 
ganizations in Massachusetts. 
The Section instituted regular fi- 
nancial reporting, provided 
members with benefit informa- 



tion, and conducted surveys on 
HMO insolvency protection. 

The Commissioner of Insurance 
promulgated regulations aimed 
at preventing insurers from of- 
fering different benefits and 
charging different premiums on 
the basis of sex. 



m The Commissioner promulgated 
emergency regulations requir- 
ing insurers to provide certain 
infertility benefits. Under the 
new regulations, benefits must 
be provided for artificial insemi- 
nation and in vitro fertilization. 

■ A 1987 regulation banned (HIV) 
AIDS testing for all health insur- 
ance and for any group insur- 
ance, while establishing the 
nation's most strictly controlled 
testing conditions for individual 
life and noncancellable disability 
insurance. 



The addition of two Hearing Offi- 
cers to the Commissioner's staff 
has allowed the Division to 
greatly improve its ability to 
conduct public hearings and 
make timely decisions on insur- 
ance rates and matters such as 
alleged fraudulent practices by 
licensees. 



"Streamlining administrative 
procedures to improve produc- 
tivity and increase effective- 
ness." 

m The design and development of a 
computer system has provided 
the Division with access to a 
number of state and national 
systems, thereby expanding its 
network of resources. 

■ With the cooperation of the Of- 
fice of the Secretary of State, a 
Records Management Project 
has been instituted to properly 
dispose of inactive files and de- 
velop strategies for maintaining 
necessary records in the most 
cost and space efficient manner. 

■ An intra-office news bulletin, en- 
titled "Re: Insurance", is being 
published by the Commissioner's 
staff. The purpose of the publica- 
tion is to keep Division personnel 
informed about projects, plans, 
and accomplishments through- 
out the agency. The public has, 
as a result, benefited from a bet- 
ter informed and uniformly 
aware office staff. 

"Protecting consumer interests 
in the insurance marketplace 
by bringing about change via 
the legislative process." 

B To combat automobile insurance 
fraud, legislation was enacted 
which prohibits insurers from 
making payments for a total 



motor vehicle theft or fire claim 
until the insured has filed re- 
quired reports with the local 
police and/or fire authorities. 

To reduce the number of 
uninsured motorists, legislation 
was enacted which prohibits 
insurers from refunding premi- 
ums for mid-term policy cancel- 
lations until the insured has 
surrendered the vehicle's num- 
ber plates to the Registry of 
Motor Vehicles. 

Health insurance benefits were 
expanded in 1987. Massachu- 
setts insurance laws now require 
health insurers to provide cover- 
age for PAP tests and mammo- 
grams. Another law requires 
that Blue Cross/Blue Shield 
benefits be provided for feeding 
formulas needed by victims of 
ulcerative colitis and Chrohn's 
disease. 




section summaries 



consumer service section 



With offices in both Boston and 
Springfield, the Consumer Service 
Section is responsible for respond- 
ing to inquiries and intervening on 
behalf of consumers to resolve com- 
plaints against insurers, agents, 
and brokers. This Section is not 
only a resource for general insur- 
ance information, but also advises 
consumers of their rights under 
Massachusetts laws and regula- 
tions, and of their rights under the 
provisions of their policies. 



In the challenging role of consumer 
service, the ability to listen and 
communicate is the key to success. 
Section personnel are trained to 
interact with the public in an alert, 
patient and understanding man- 
ner. The Section received 85,096 
telephone calls from consumers 
during 1987 - 10,000 more than in 
1986. The staff also resolved 6,748 
cases, recovered $285,296 for con- 
sumers and issued numerous infor- 
mational letters. 



The Section maintains a complaint 
log listing each complaint and in- 
quiry received. The complaint log 
may suggest patterns of unfair or 
abusive insurance practices by a 
particular agent, broker, or insur- 
ance company. In some cases the 
Special Investigations Unit is 
alerted and may take action. Also, 
because these patterns may suggest 
trends in the industry, they are re- 
ferred to the Commissioner for pos- 
sible legislative or other regulatory 
action. 



The State Rating Bureau (SRB) was 
established by the Legislature in 
1975 and is responsible for the in- 
vestigation and study of rates 
charged by insurers for certain 
types of insurance, especially pri- 
vate passenger motor vehicle insur- 
ance. It is staffed by professionally 
qualified actuaries and mathemati- 
cians, computer analysts, attor- 
neys, policy form analysts, and sec- 
retarial and support staff. The 
duties of the SRB are primarily 
rating and policy review. 

The SRB makes recommendations 
I to the Commissioner on rate 
changes for various types of insur- 
ance, including private passenger 
automobile, medical malpractice, 
li workers' compensation, Blue Cross/ 
i| Blue Shield Medex (Medicare sup- 
plement), and non-group health 
insurance. It also analyzes numer- 
ous homeowners' insurance filings 
submitted by the Insurance Serv- 
ices Office (ISO) and independent 
insurers. 



state rating bureau 

In addition to participating as a 
statutory party in the annual pri- 
vate passenger motor vehicle insur- 
ance rate hearing, the SRB is in- 
volved in many automobile insur- 
ance-related matters including: 
making recommendations to the 
Commissioner on changes in terri- 
torial rating assignments; partici- 
pating in the annual hearing to 
determine whether the Commis- 
sioner should continue to fix and 
establish rates; conducting an actu- 
arial review of the competitive rate 
filings of companies providing com- 
mercial motor vehicle insurance; 
and analyzing statistics and related 
data. 

During 1986, the SRB developed 
and proposed to the Commissioner a 
low mileage discount plan to give 
automobile insurance premium dis- 
counts of up to 10% for those who 
drive fewer than 7,500 miles per 
year. SRB research revealed that 
low mileage drivers are less likely to 



have accidents and, therefore, as a 
group they generate fewer losses 
than average or high-mileage driv- 
ers. The Commissioner adopted the 
SRB's plan beginning in the 1987 
policy year. 

The SRB is also responsible for re- 
viewing a broad range of filings sub- 
mitted by insurance companies 
doing business in Massachusetts in 
the property/casualty, accident & 
health, and individual life & annu- 
ity insurance areas. It receives 
thousands of policy, rate, and other 
filings annually. The purpose of the 
policy and rate review is to ensure 
that provisions of the filings are 
proper and in compliance with the 
Commonwealth's insurance laws. 
The SRB has embarked upon a 
comprehensive program to improve 
the operating efficiency of this im- 
portant agency activity. The pro- 
gram is expected to bring about 
positive results during 1988. 



section summaries 



medical malpractice analysis bureau 



The Medical Malpractice Analysis 
Bureau was established by the 
Medical Malpractice Reform Law, 
St. 1986, c. 351, which went into 
effect on July 1, 1986. The Bureau's 
chief responsibility is to support the 
Commissioner's duty to fix and es- 
tablish rates to be charged by the 
Medical Malpractice Joint Under- 
writing Association of Massachu- 
setts (JUA). The JUA was estab- 
lished by the Legislature in 1975 
when most insurance companies 
ceased issuing medical malpractice 
liability policies to physicians and 
hospitals. The Bureau collects and 
analyzes data on medical malprac- 



The Agent and Broker Licensing 
Section oversees the licensing of 
qualified individuals, corporations, 
and partnerships as Agents, Bro- 
kers, Advisers, and Public Fire Loss 
Adjusters. These licensing duties 
include the monitoring of pre-li- 
censing education and continuing 
education, along with testing, scor- 
ing, and grading procedures. 

The Section's largest volume of 
work involves the licensing of per- 
sons as agents and the appointing of 
those agents to one or more insur- 
ance companies. The Section has 
issued approximately 200,000 such 
appointments to the 43,000 licensed 
agents in Massachusetts. It cur- 
rently receives 500 applications for 
both first-time appointments and 
additional appointments each 
week. 



tice insurance rates for physicians, 
surgeons, hospitals, community 
health centers, dentists, nurse- 
midwives, and other appropriate 
groups which the Commissioner 
may consider for inclusion in the 
JUA A required full ratemaking 
proceeding is held annually for each 
group. A full ratemaking proceed- 
ing includes: major rate filings, 
extensive comment and testimony, 
legal rulings, and written decisions. 
During the 1987 year, the Bureau 
determined rates for each of these 
groups and updated past rate years 
for dentists and nurse-midwives. 



agent and broker licensing 

In 1987, the processing time for new 
agents' licenses was significantly 
improved. This was accomplished 
with the help of a sophisticated and 
reliable electronic data processing 
system. The current processing 
time, from receipt of application to 
licensure, is three weeks. In 1986, 
before automation of the licensing 
process, it took an average of nine 
months for licensure to be com- 
pleted. 

Brokers receive a three year license. 
During a six month period in 1987, 
the brokers' subsection issued over 
6,500 new and renewal licenses to 
corporations, individuals, and part- 
ners who are brokers. There are 
approximately 20,000 licensed bro- 
kers in the Commonwealth. Most 
broker applications are reviewed, 
approved, and issued within a few 
days of their receipt. 



The Bureau undertakes other pro- 
ceedings and projects as they relate 
to medical malpractice. Last year, 
the Bureau intervened to expedite 
the JUA's delayed doctors' billings 
to reduce lost JUA investment in- 
come. The Bureau also determines 
total physician and dentist revenue, 
and fixes the rates for statutory 
subsidies payable by Blue Shield 
and Delta Dental Plan insureds. 

In 1989, a plan to establish physi- 
cian rates based on experience is 
expected. The Bureau has already 
taken steps to develop the project's 
database. 



The certification subsection proc- 
esses letters of good standing for 
licensed agents and brokers. In six 
months during 1987, this subsec- 
tion processed over 15,000 certifica- 
tion letters. 

In its educational functions, the 
Agents and Brokers Licensing Sec- 
tion works closely with Educational 
Testing Systems (ETS), a service 
which administers licensing exami- 
nations for agents and brokers. In 
1987, ETS. introduced KEYWAY, 
an electronic device which elimi- 
nates manual grading of tests. In 
addition, programs of study for both 
the pre-licensing education and 
continuing education of insurance 
personnel in Massachusetts have 
been revised and improved. 



8 



section summaries 



board of appeal on motor vehicle liability policies and bonds 



rhe Board of Appeal on Motor Ve- 
hicle Liability Policies and Bonds 
vas established to hear appeals of 
surcharges under the Safe Driver 
insurance Plan (SDIP), automobile 
nsurance cancellations, and deci- 
sions of the Registrar of Motor 
Vehicles. 

The vast majority of appeals heard 
by the Board - 29,525 in 1987 - in- 
volve challenges to surcharges im- 
posed under the Safe Driver Insur- 
ance Plan. The following chart is 
illustrative of this fact: 



H Merit Rating 

Surcharge - 29,525 

H Registry of 

Motor Vehicles - 2,567 



■ Insurance 

Cancellations - 188 

1987 




The Safe Driver Insurance Plan 
requires that after any collision or 
property damage liability claim has 
been paid, the insurance company 
must determine whether the 
operator and/or policyholder should 
be assessed a surcharge. A determi- 
nation of fault must be in accor- 
dance with law and in accordance 
with the Standards of Fault promul- 
gated by the Board. The surcharge 
notice contains the reason(s) for the 
surcharge, an explanation of the 
right of appeal, and an appeal form 
(complaint) with filing instructions. 
A Finding and Order, or decision, is 
sent to the appellant, the policy- 
holder, the attorney, the insurance 
company, and the Merit Rating 
Board. 

For the convenience of appellants, 
surcharge appeal hearings are held 
in 12 locations throughout the 
Commonwealth by individual 
Board Members, Hearing Officers, 
and the Executive Secretary. 

With some differences, the appeal 
process for automobile insurance 
cancellations and for decisions of 
the Registrar of Motor Vehicles is 
similar to that for surcharge ap- 
peals. All Board decisions may be 
further appealed in Superior Court. 



The surcharge appeals process is 
as follows: 



Board of Appeal 
SDIP • Surcharge Appeals 
Process 



Notice of Surcharge issued by 
insurance company 


\ 


f 


Insured files written appeal with 
Board of Appeal within 30 days 


> 


i 


Hearing Held in one of 12 
locations throughout the 
Commonwealth. 


> 


/ 


Surcharge affirmed or reversed 


\ 


f 


Further appeal to Superior 
Court 



9 



section summaries 



The Financial Surveillance Section 
is the insurance company licensing 
arm of the Division. It is responsible 
for ensuring that only those compa- 
nies that are financially sound are 
licensed or authorized to transact 
business in the Commonwealth. 
The annual financial statements, 
quarterly financial statements, 
and, in some cases, monthly finan- 
cial statements of each company are 
regularly reviewed by the Financial 
Surveillance staff in order to iden- 
tify and rectify insurance company 
solvency problems and abuses. In 
fulfilling these responsibilities, the 
Section reviews and processes new 
company licenses, renews existing 
licenses, inactivates company li- 
censes, processes license certifica- 
tions and their appropriate fees, 
and notifies other agencies, such as 
the Department of Revenue, the 
Registry of Motor Vehicles, the 



financial surveillance section 

Industrial Accident Board, the 
Commonwealth Automobile Rein- 
surers, and the Massachusetts In- 
surers Insolvency Fund, of company 
name and address changes and 
changes in license status due to 
financial integrity. Furthermore, 
because workers' compensation 
claims are not covered by the Mas- 
sachusetts Insolvency Fund, insur- 
ers who write workers' compensa- 
tion must keep securities on deposit 
to ensure sufficient coverage when 
claims are made. These insurers 
also submit a special filing to the 
Division. The Financial Surveil- 
lance Section closely monitors this 
important activity. The Section is 
also the Division's liaison with the 
National Association of Insurance 
Commissioners (NAIC) via a com- 
puter database. 

In 1987, the Section enhanced its 



computer capabilities in the areas of 
company licensing, data entry, and 
report production along with rede- 
sign and preparation of licenses. In 
addition, hearings were conducted 
by members of this Section and 
decisions were rendered on acquisi- 
tions involving three domestic in- 
surance companies: Massachusetts 
Casualty Insurance Company, AM. 
Life Insurance Company, and 
American Policyholders Insurance 
Company. 

Furthermore, the Section licensed 
58 companies; renewed 850 com- 
pany licenses; inactivated 13 com- 
panies; processed 32 license amend- 
ments and 146 address changes; 
prepared 2,500 company license/ 
certificates of compliance and 850 
assessments and processed the fees 
charged for these services. 



motor vehicle damage appraisers board 



The Motor Vehicle Damage Ap- 
praisers Board and its support staff 
is responsible for regulating motor 
vehicle damage appraisers in Mas- 
sachusetts. Four of the five Board 
members are appointed by the Gov- 
ernor. The fifth member is ap- 
pointed by the Commissioner and 
serves as the Board's Chairman. 



The Board is charged with institut- 
ing and maintaining minimum 
standards for the conduct of motor 
vehicle damage appraisers. It con- 
ducts licensing examinations, is- 
sues and renews appraisers' li- 
censes, and processes applications. 
Its members are empowered to re- 
voke, cancel, and suspend licenses 
following a hearing process that 



may result from complaints that are 
brought before the Board. In addi- 
tion, the Board sets licensing eligi- 
bility requirements, approves train- 
ing programs, and establishes li- 
cense revocation guidelines. In 
1987, the Board and staff renewed 
10,300 appraiser licenses and is- 
sued approximately 120 new li- 
censes. 



10 



section summaries 



Chapter 175, section 4 of the Massa- 
chusetts General Laws requires the 
Division to determine the financial 
status of certain institutions. It also 
requires the Division to determine 
whether or not those institutions 
are at risk of becoming insolvent. 
The Field Audit Section conducts 
financial examinations of insurance 
companies, dental services, health 
maintenance organizations, sav- 
ings bank life insurance depart- 
ments, fraternal benefit societies, 
and other insurance entities. 

Field Audit staff reviews insurance 
institutions to ensure that they are 
fulfilling their legal obligations in a 
number of areas. They must: be 
capable of meeting their responsi- 
bility if claims are made, conduct all 
bookkeeping procedures as re- 
quired by regulations, ensure 
prompt and complete payment of 
claims to policyholders, comply with 
all applicable laws and regulations, 



field audit section 

and charge approved and reason- 
able rates. In 1987 the Section 
audited 20 domestic life insurance 
companies and 20 savings bank life 
insurance departments. The Field 
Audit Section also audits fraternal 
benefit societies. Fifty-six such 
societies were examined in 1987. 

Several subsections exist within the 
Field Audit Section. In the event a 
broker is denied coverage for a par- 
ticular risk by three insurance 
companies, the state allows spe- 
cially licensed brokers to use an out- 
of-state company as an insurer. 
Although these companies are not 
licensed, they are approved to do 
business in the Commonwealth and 
are regulated by the Surplus Lines 
subsection. This subsection is also 
responsible for licensing all Motor 
Clubs and their agents, including 
AAA, ALA, and Cross Country, as 
well as life insurance departments 
of savings banks under the Savings 



Bank Life Insurance Council. 

During 1987, the Surplus Lines 
subsection improved its tracking of 
special brokers by revising and 
expanding the forms which are filed 
with the Division. Currently, a 
computerized tracking system of all 
surplus lines companies and bro- 
kers is being developed. This sys- 
tem will improve the monitoring of 
the 4% statutorily required special 
brokers' tax and will identify pat- 
terns in the behavior of licensees, 
thereby creating a warning system 
for abuses which could affect the 
consumer. 

The Valuation of Life Reserves 
subsection reviews the financial 
records of all domestic life insur- 
ance companies by studying the 
companies' payment plans and 
comparing them to the state aggre- 
gate as depicted on mortality charts 
in the General Laws. 



Massachusetts is experiencing a 
boom in its health care industry. To 
meet the insurance needs of a grow- 
ing community of health care con- 
sumers and providers, the Division 
staffs and operate a section entirely 
oriented toward this one area of 
insurance. The Health Policy Sec- 
tion oversees and coordinates the 
Division's regulation of health 
maintenance organizations (HMO), 
Blue Cross and Blue Shield, and all 
other aspects of health insurance in 
the Commonwealth. 

Established in 1984, the Health 
Policy Section has made substantial 
progress in improving HMO regula- 
tory compliance and oversight. In 
addition to licensing three new 
HMOs in 1987, performance and 



health policy section 

solvency monitoring was enhanced 
by institutingfinancial, enrollment, 
and utilization data reporting pro- 
cedures. This information is stored 
on an "early warning" database, 
where it is compared with estab- 
lished standards to identify sub- 
standard performance. The Section 
also examined and, where neces- 
sary, brought HMOs into compli- 
ance with state mandated benefits 
laws, such as mental health and 
alcoholism coverage. In regard to 
mental health benefits, HMOs were 
notified of statutory requirements 
establishing $500 as the minimum 
benefit for outpatient care and 60 
days for inpatient care. The Section 
conducted an insolvency protection 
survey to determine if HMOs have 
made adequate provisions to pro- 



tect members from loss of coverage 
for unpaid medical bills in the un- 
likely event that the HMO should 
become insolvent. 

Access to the Health Policy Section's 
resources was updated in 1987 with 
the availability of three different 
quarterly reports that are provided 
to consumers and organizations 
through the Section's mailing list. 
The Section has also become a cen- 
tral clearinghouse for information 
on long-term care insurance. Be- 
cause this is a relatively new type of 
insurance, the Health Policy Sec- 
tion is working with the Legal Sec- 
tion to draft regulations which will 
establish standards and prevent 
possible abuses in coverage. 



11 



section summaries 



A staff of thirteen attorneys pro- 
vides the Commissioner with ad- 
vice, guidance, and interpretation 
in his role as regulator of the 
Commonwealth's insurance indus- 
try. The Legal Section assists other 
sections of the Division when legal 
expertise is needed and plays a vital 
role in the annual automobile 
ratesetting process as well as in 
other ratesetting procedures. 

In 1987, the legal staff was a key 
participant in formulating deci- 
sions on a number of challenging 
issues, most notably, the attempts 
by automobile insurers to withdraw 
from the Massachusetts market. 

In addition to overseeing the legal 
aspects of regulating the Massachu- 



legal section 

setts insurance market, the Section 
drafts and amends legislation and 
regulations. It also interprets both 
state and federal insurance stat- 
utes. Some of the most significant 
legislative initiatives in 1987 were 
in the areas of insurance fraud, 
uninsured motorists, anti-discrimi- 
nation, coverage for pollution liabil- 
ity, medical malpractice, ski area 
operations, amusement parks, and 
human service providers. Addi- 
tional initiatives addressed manda- 
tory coverage for infertility, PAP 
tests, mammograms, and formulas 
used in the treatment of Chrohn's 
disease and ulcerative colitis. 

Among the most significant regula- 
tory initiatives were: streamlining 
procedures for the conduct of hear- 



ings on motor vehicle insurance 
rates, providing for gender-neutral 
insurance practices, and limiting : 
insurers' ability to test for the pres- 
ence of HIV antibodies associated i 
with the AIDS virus. 

The Special Investigations Unit 
(SIU) is under the supervision of the 
Legal Section's Chief Enforcement 
Counsel. SIU staff investigate alle- 
gations of wrongdoing by licensees 
including agents, brokers, and in- 
surance companies. The SIU is the 
Division's watchdog for consumer 
fraud, and its investigative activi- 
ties serve to deter abuses and viola- 
tions of our insurance laws. 



The Administration Section is the 
central resource for the Division's 
daily operations. The Section staff 
is responsible for the budget, pay- 
roll, mailroom, messenger service, 
supplies, personnel, and computer 
operations, as well as the collection 
and accounting of all revenue. In 
1987, the Administration Section 
was trained in the Massachusetts 
Management, Accounting, and 



The responsibilities of the EDP 
Director and staff are to tailor and 
maintain a computerized support 
system for the Division and to ex- 
pand the Division's capabilities by 
introducing equipment such as the 
Wang VS 70110. 

This automation is evident in a 
number of areas. Word processing 
and data processing capabilities are 
supported by a Wang VS 65 system. 
The Wang system allows agency 



administration section 

Reporting System (MMARS). 
Training on MMARS resulted in the 
implementation of a computerized 
system for bill processing, expendi- 
ture and recordkeeping that has 
been adopted by all the 
Commonwealth's agencies. 

In addition, the Section oversees the 
training of agency personnel by 
coordinating seminars and courses 



electronic data processing 

personnel to perform a variety of 
tasks at the numerous work sta- 
tions located throughout the Divi- 
sion. The Board of Appeal utilizes a 
state link, the Merit Rating Board 
computer, which provides Board 
members with access to motorists' 
driving records. On a national level, 
the Financial Surveillance Section 
currently maintains a phone link 
with the National Association of 
Insurance Commissioners which, 
when fully activated, will permit 



to enhance job skills and perform- 
ance. The Section is also respon- 
sible for assuring the participation 
of the Division's supervisors and 
managers in the Performance Man- 
agement System (PMS) and Em- 
ployee Performance Review System 
(EPRS), which are statewide pro- 
grams designed for improving goal 
orientation and goal achievement in 
the workplace. 



in-agency review of insurance com- 
panies' financial statements filed 
with other states. Lexis, a national 
legal database and text subscrip- 
tion database, is yet another auto- 
mated research tool available to the 
Division. By participating in 
external networks such as these, 
the Division has broadened its re- 
sources, enhanced daily productiv- 
ity, and reduced the volume of paper 
formerly processed by agency per- 
sonnel. 



12 



cooperative activities 

The Division oversees the operation of a number of legislatively created insurance entities, directly participates in 
the activities of several of the Commonwealth's boards and commissions, and participates in informal policy study 
groups on a variety of insurance issues. Of particular interest and importance are the following organization:. 



Commonwealth Automobile 
Reinsurers (CAR) 

CAR is the residual market for auto- 
mobile insurance. The Commis- 
sioner appoints its 13-member Gov- 
erning Committee, hears appeals of 
Governing Committee decisions 
and approves amendments to the 
Plan and Rules of Operation. 

Liquor Liability Joint Underwrit- 
ing Association 

Established in 1985, this Associa- 
tion provides liquor legal liability 
insurance to liquor licensees who 
are unable to obtain coverage in the 
regular market. The Commissioner 
appoints five members of the 13- 
member Board of Directors. 

Medical Malpractice Joint 
Underwriting Association 

This Association provides medical 
malpractice liability insurance cov- 
erage for physicians, hospitals, and 
other health care providers includ- 
ing dentists, nurse-midwives, and 
community health centers. Due to 
adverse voluntary market condi- 
tions, the Association is the only 
source of medical malpractice cover- 
age available to most physicians 
and many hospitals in Massachu- 
setts. Of the 15 members on the 
Board of Directors, six are ap- 
pointed by the Commissioner. 

; 



Massachusetts Property Insur- 
ance Underwriting Association 
(FAIR PLAN) 

The FAIR PLAN provides property 
insurance, including fire insurance, 
for those residential and commer- 
cial property owners who are unable 
to obtain coverage in the regular 
market. Six members of the 18- 
member Board of Directors repre- 
sent the public and are appointed 
annually by the Commissioner. 

Motor Vehicle Insurance Merit 
Rating Board 

Structurally a part of the Registry of 
Motor Vehicles, the Merit Rating 
Board consists of three members: 
the Registrar of Motor Vehicles, the 
Attorney General, and the Commis- 
sioner of Insurance. The Board 
facilitates the implementation and 
operation of the Safe Driver Insur- 
ance Plan (SDIP). The Board's staff, 
headed by an Executive Director, 
compiles, gathers, and dissemi- 
nates motor vehicle operator infor- 
mation to insurers and law enforce- 
ment agencies for SDIP purposes. 

Group Insurance Commission 

The Commissioner is a member of 
the Commission's nine member 
Board, all of whom are appointed by 



the Governor. The Commission's 
primary responsibility is to negoti- 
ate programs of group health, acci- 
dent, and life insurance on behalf of 
employees of the Commonwealth. 

Insolvency Funds 

Both the Life and Health Insurance 
Insolvency Fund and the Massa- 
chusetts Insurers Insolvency Fund 
were created by the Legislature to 
protect consumers against the fail- 
ure by insurers in the performance 
of their contractual obligations due 
to impairment or insolvency. Each 
Fund is headed by a Board of Direc- 
tors consisting solely of insurer 
representatives. Board members 
are nominated by the Funds' mem- 
ber/insurers. Appointments to the 
Boards are subject to the 
Commissioner's approval. 

A Hazardous Waste Insolvency 
Fund was created by the Legisla- 
ture in 1986 to satisfy consumer 
claims in the event a hazardous 
materials generator becomes im- 
paired or insolvent. A 9-member 
Board oversees the Fund. Four 
members are elected subject to the 
Commissioner's approval. 



division of insurance goals for 1988 



"To enact laws which enhance 
our commitment to consumer 
protection." 

■ The Division is thoroughly 
committed to the challenge of 
automobile insurance reform in 
1988. Thus, our key legislative 



priority in 1988 is the passage of 
Governor Dukakis' automobile 
insurance reform bill. The 
Administration's package calls 
for updating the no-fault law, 
expanding consumer choices 
while simplifying coverages, 
and increasing efforts to crack 



down on fraud and abuse in the 
system. In addition to saving 
Massachusetts drivers an esti- 
mated $150 million in 1989, 
substantial automobile insur- 
ance reform will make our auto- 
mobile insurance system sim- 
pler and more fair. 



13 



goals 



■ The Division is working for the 
passage of a bill which would fur- 
ther regulate the sale of credit in- 
surance. It is projected that 
passage of this legislation will 
result in savings for all who pur- 
chase credit insurance in the 
Commonwealth. 

■ During the 1988 Legislative ses- 
sion, the Division will recom- 
mend the adoption of legislation 
on insurance information and 
privacy protection. At present, 
Massachusetts consumers enjoy 
little protection from disclosure 
of personal information which is 
obtained by insurance compa- 
nies, support organizations, or 
agents. This bill promises pro- 
tection by requiring insurers to 
notify consumers, who are apply- 
ing for insurance, of the 
company's collection and disclo- 
sure practices. 

■ The Division, fully supportive of 
strengthening anti-discrimina- 
tion protection for the physically 
impaired, blind, and mentally re- 
tarded, is working for the pas- 
sage of legislation which further 
restricts discriminatory insur- 
ance practices. 

"To service the insurance 
comsumer with innovative 
programs and systems." 

m As a consumer oriented agency, 
the Division must guarantee 
that its personnel, resources, 
and services are easily accessible 
to those served. Because many 
services are provided over the 
telephone, the Division is replac- 
ing an outmoded telephone sys- 
tem with the AT&T System 75 a 
voice terminal network which is 
capable of receiving, directing, 
and connecting a high volume of 
incoming phone calls quickly and 
efficiently. The AT&T System 75 
will help direct questions and 
complaints to the people who are 



best able to resolve them, thus 
reducing consumer complaint 
response time. 

The Division is planning to ex- 
pand its consumer information 
efforts to include the publication 
and distribution of informa- 
tional brochures and buyers' 
guides on a variety of insurance 
topics. The series of pamphlets 
will answer the most frequently 
asked insurance questions, di- 
rect buyers in making smart, 
money-saving choices, and in- 
form consumers of need-to-know 
developments in the insurance 
industry. 

Each month, the Consumer 
Service Section provides the 
Commissioner and the Execu- 
tive Office of Consumer Affairs 
and Business Regulation with a 
list of agents, brokers, and insur- 
ance companies that are ranked 
according to the number of com- 
plaints received against each. In 
order for this data to realistically 
reflect the rate of consumer dis- 
satisfaction, the Consumer Serv- 
ice Section is planning to insti- 
tute a computerized program 
which will rank companies based 
on the number of complaints 
logged against each as compared 
to market share. The result will 
be a reliable measure of industry 
performance. 

Central to the Division's con- 
sumer protection role is the en- 
forcement of Massachusetts in- 
surance laws and the investiga- 
tion of activities which may vio- 
late or compromise those laws. 
Additional personnel have pro- 
vided the Special Investigations 
Unit and the Enforcement arm of 
the Legal Section with the re- 
sources needed to expand en- 
forcement activities in 1988. 



"To improve the quality of the 
work environment and support 
services for Division personnel 
and the public." 

■ The State Rating Bureau's Pol- 
icy Forms Section is developing a 
program to enhance the consis- 
tency and objectivity necessary 
in reviewing filings submitted by 
insurance companies. The goals 
of the program are to automate 
the review process, to institute 
minimum standards for review, 
and to work with the insurance 
industry to standardize policies. 

■ In July of 1987, the Division re- 
ceived approval from the Execu- 
tive Office of Administration and 
Finance to bid for private office 
space in Boston. A newly reno- 
vated building at 280 Friend 
Street near North Station was 
selected. 

■ In 1988, the Electronic Data 
Processing Unit will expand its 
efforts to tailor a computerized 
support system for the Division, 
to expand the agency's capabili- 
ties by introducing new equip- 
ment such as the Wang VS 
70110, and to ensure the smooth 
relocation of the system to the 
Friend Street offices. 

"To expand the regulatory 
umbrella to assure consumer 
protection." 

B Long term care insurance, which 
provides coverage for services 
such as nursing home care and 
some home health care benefits 
that are not covered by Medicare 
or traditional health insurance, 
will continue to be an issue de- 
serving much attention. The 
Division is drafting regulations 
to govern the sale of this new 
type of health insurance. 

Variable life insurance combines 
death protection with an invest- 



14 



goals / financial statement 



ment component. Although 
Massachusetts currently regu- 
lates the sale of fixed premium 
variable life insurance, life in- 
surers are not authorized to sell a 
related product - flexible pre- 
mium variable life insurance. 
Flexible premium variable life 
insurance differs from fixed pre- 



mium in that the amount and 
frequency of payments vary with 
the policyholder's investment 
choices and the policies contain 
more limited minimum death 
benefit guarantees. Because 
flexible premium variable life 
policies are more complex than 
traditional life products, the 



Division's legal staff has been 
working to amend current vari- 
able life regulations to permit 
the sale of flexible premium life 
and to ensure that consumers 
make informed decisions when 
purchasing this product. The 
amended regulation will be 
promulgated in 1988. 



1987 financial statement 

In addition to the approximately $200 million in premium taxes paid by insurance companies to the Commonwealth 
each year, the Division generates substantial annual revenue for the General Fund through its licensing, 
examination, filing and other fees and charges through direct, statutorily mandated assessments against insurance 
companies. These assessments reimburse the General Fund of the Commonwealth for expenses of various state 
boards, agencies, and commissions which deal with insurance matters. 

FISCAL YEAR 1987 REVENUE 

Industry Assessments $2,879,342.00 

Licensing and Examination Fees 4,699,463.00 

Surcharge Filings 312,935.00 

Special Brokers Tax 5,580,685.00 

Reimbursement for Audit & Other Services 5,435,810.00 

TOTAL REVENUE 18,908,235.00 



The following bar graph illustrates that revenues collected by the Division have steadily increased while the 
Division's operating budget for Fiscal Years 1986 and 1987 has remained essentially level. 




18.908,235 



16.909.802 




FY 85 



FY 86 



FY 87 



Administration - Budget vs. Revenue 



15 



appendix 



insurance related acts and resolves of 1987 



Chapter 44 

An Act Relative to Automobile In- 
surance Fraud. 

Signed by the Governor on May 5, 
1987. 

Chapter 68 

An Act Further Regulating the Use 
of Passenger Restraints on Chil- 
dren in Certain Motor Vehicles. 
Signed by the Governor on May 11, 

1987. 

Chapter 69 

An Act Further Regulating Medical 
Malpractice Insurance Premiums. 
Signed by the Governor on May 22, 
1987. Chapter 69 took effect imme- 
diately upon signing. 

Chapter 86 

An Act Relative to Reinsurance 
Involving Domestic Life Compa- 
nies. 

Signed by the Governor on May 29, 
1987. 

Chapter 169 

An Act Further Regulating Individ- 
ual Deferred Premium Liability in 
Regards to Medical Malpractice 
Premiums. 

Signed by the Governor on June 25, 
1987. Chapter 169 took effect 
immediately upon signing. 

Chapter 189 

An Act Relative to Automobile In- 
surance Payments for Collision 
Repair. 

Signed by the Governor on June 30, 
1987. 



Chapter 233 

An Act Relative to the Massachu- 
setts Crime Insurance Program. 
Signed by the Governor on June 14, 
1987. 

Chapter 238 

An Act Limiting the Tort Liability of 
Individual Trustees, Directors, Of- 
ficers, or Agents of Certain Chari- 
table Organizations. 
Signed by the Governor on July 14, 
1987. 

Chapter 246 

An Act Providing for Local Option 
Insurance Coverage of Reserve, 
Permanent-Intermittent, or Call 
Firefighters. 

Signed by the Governor on July 14, 
1987. 

Chapter 255 

An Act Further Regulating the 
Return of Motor Vehicle Number 
Plates. 

Signed by the Governor on July 14, 
1987. 

Chapter 262 

An Act Further Regulating the Li- 
censing of Insurance Agents and 
Brokers. 

Signed by the Governor July 14, 
1987. 

Chapter 263 

An Act Relative to the Classification 
of Sailmaker Shops for Fire Insur- 
ance. 

Signed by the Governor on July 14, 
1987. 



Chapter 268 

An Act Establishing a Liability 
Fund in the Town of Amherst. 
Signed by the Governor on July 15, 
1987. 

Chapter 287 

An Act Further Defining the Re- 
sponsibilities, Duties, and Liabili- 
ties of Skiers and Ski Area Operator 
Relative to those Risks Inherent in 
the Sport of Skiing. In addition, this 
Act Stabilizes Massachusetts Ski 
Areas' Liability Insurance Cost. 
Signed by the Governor on July 21, 
1987. 

Chapter 332 

An Act Exempting Nursing Homes 
from Certain Reporting and Sus- 
pension Requirements and Risk 
Management Programs. 
Signed by the Governor on July 23, 
1987. Chapter 332 took effect 
immediately upon signing. 

Chapter 354 

An Act Requiring Insurance Cover- 
age for Plumbing and Gas Fitting 
Contractors. 

Signed by the Governor on July 15, 
1987. 

Chapter 358 

An Act Providing Group Insurance 
Benefits for Certain Employees in 
the City of Methuen. 
Signed by the Governor on August 
11, 1987. 



16 



■ 



appendix 



Chapter 363 

An Act Providing Coverage for Cer- 
tain Medical Preventive Screening 
Tests. 

Signed by the Governor on August 
27, 1987. 

Chapter 370 

An Act Relative to Certain Automo- 
bile Insurance Payments. 
Signed by the Governor on Septem- 
ber 30, 1987. Chapter 370 took 
effect immediately upon signing. 

Chapter 394 

An Act Providing a Medical Defini- 
tion of Infertility. 

Signed by the Governor on Septem- 
ber 29, 1987. 

Chapter 401 

An Act Relative to Certain Insur- 
ance Premiums Payable by the 
Surviving Spouses of Certain Mu- 
nicipal Employees. 
Signed by the Governor on October 
13, 1987. 

Chapter 419 

An Act Further Regulating Liabil- 
ity Insurance for Permanent 
Amusement Parks. 
Signed by the Governor on October 
20, 1987. 

Chapter 542 

An Act Relative to Access to Health 
Care Services. 

Signed by the Governor on Decem- 
ber 2, 1987. 

Chapter 560 

An Act Relative to Medical Malprac- 
tice Insurance. 

Signed by the Governor on Decem- 
ber 8, 1987. 

Chapter 565 

An Act Clarifying Procedures for 
Notifying Governmental Units of 
Claims by Employees under a 
Group Insurance Contract. 
Signed by the Governor on Decem- 
ber 14, 1987. 



Chapter 575 

An Act Further Clarifying Health 
Maintenance Organization Cover- 
age for Public Employees. 
Signed by the Governor on Decem- 
ber 16, 1987. 

Chapter 614 

An Act Increasing the Membership 
of the Liquor Liability JUA. 
Signed by the Governor on Decem- 
ber 29, 1987. Chapter 614 took 
effect immediately upon signing. 

Chapter 621 

An Act Providing for Common En- 
rollment Dates for Supplemental 
Medicare Health Plans. 
Signed by the Governor on Decem- 
ber 29, 1987. 

Chapter 634 

An Act Authorizing Certain Provi- 
sions Allowed in Articles of Organi- 
zation Limiting the Liability of Di- 
rectors of Certain Business Corpo- 
rations to be Stated in Corporations 
By-Law in lieu thereof. 
Signed by the Governor on Decem- 
ber 30, 1987. 

Chapter 642 

An Act Relative to the Hazardous 
Waste Insolvency Fund. 
Signed by the Governor on Decem- 
ber 31, 1987. 

Chapter 650 

An Act Relative to Pollution Liabil- 
ity Reinsurance. 

Signed by the Governor on January 
4, 1988. 

Chapter 683 

An Act Providing Medical Benefits 
for Ulcerative Colitis and Other 
Diseases. 

Signed by the Governor on January 
6, 1988. 

Chapter 691 

An Act Relative to Workers' Com- 
pensation. 

Signed by the Governor on January 
6, 1988. 



Chapter 711 

An Act Further Regulating Insur- 
ance Coverage for Chiropractic 
Services. 

Signed by the Governor on January 
12, 1988. 

Chapter 713 

An Act Continuing Certain Benefits 
for State Employees on Parental 
Leave. 

Signed by the Governor on January 

12, 1988. 

Chapter 742 

An Act Relative to Medical 
Malpractice. 

Signed by the Governor on January 

13, 1988. 



17 



1988 

ANNUAL REPORT 

COMMONWEALTH 
OF 

MASSACHUSETTS 
DIVISION OF INSURANCE 



VI 



MR 

368M3 
I59r 
1988 
c.1 



^te Library of / 



House. 



Boston 02133 



fassachusefts 




Included here are the achievements of a dedicated and talented group 
of people committed to protecting and advancing the interests of 
insurance consumers while maintaining the financial integrity of a 
complex and diversified insurance market. 



On behalf of the entire staff of the Massachusetts Division of Insurance, 
I am pleased to present the 1988 Annual Report. 



In this spirit, the Division was a key participant in the development and implementation of Chapter 273 
of the Acts of 1 988, the Commonwealth's most sweeping automobile insurance reform initiative in 
nearly a generation. Insurers and insureds alike are now realizing a significant savings as a result of 
the law's update of the No-Fault system, expansion of consumer choices, and implementation of cost 
containment initiatives and anti-fraud programs. 

Like automobile insurance reform, ensuring a fair and responsive health insurance market for the 
Commonwealth's citizens is a major priority of the Division. Highlighting the Division's health-related 
efforts last year, was the drafting of a proposed regulation governing the sale and marketing of long- 
term care insurance policies. The regulation, which was promulgated in April 1989, gives Massachusetts 
consumers some of the most comprehensive medical and support services coverage in the country. 

Service to consumers and licensees expanded considerably in 1988, despite budgetary constraints. 
Among the most notable examples were the recovery of nearly $500,000 for consumers, the 
convening of 33,225 merit rating surcharge appeal hearings and the issuance of approximately 81 ,000 
licenses to agents, brokers, advisors, public fire loss adjusters and domestic and foreign companies. 
As a result of aggressive investigative activities, the Division imposed a significant number of 
disciplinary actions and fines against licensees for misconduct in the business of insurance. Office 
efficiency and productivity were also enhanced. Information systems were streamlined to access 
national resources, antiquated filing systems were revamped and automated and new auditing and 
policy approval procedures were implemented. 

As the new Commissioner of Insurance, I wish to extend my gratitude to Governor Michael S. Dukakis 
and the members of the General Court for their continued support of the Division's goals. Roger M. 
Singer, who served as Commissioner during 1988, is to be commended for his contribution to the 
Division's many achievements. I look forward to the challenges in the year ahead. 




Timothy H. Gailey 
Commissioner 



NTS 

Introduction 
1988 Highlights 

Company Licensing and Financial Surveillance 
Field Audit 

Agent and Broker Licensing 
Consumer Service 

State Rating Bureau 

Board of Appeal on Motor Vehicle Liability Policies and Bonds 
Medical Malpractice Analysis Bureau 
Administration 
Health Policy 
Legal 

Acts and Resolves of 1988 
Code of Massachusetts Regulations 
Enforcement Actions 
Decisions and Orders 
Cooperative Activities 
Financial Highlights 



I 



INTRODUCTION 




Since the 1940s, as a result of Congress' passage of the McCarran-Ferguson 
Act, the insurance industry has been subject largely to state rather than federal 
oversight. Over the years, the Massachusetts Legislature has granted the 
Commissioner of Insurance broad authority to oversee nearly every aspect of 
the insurance industry, particularly personal lines of insurance such as private 
passenger motor vehicle, homeowners, life and accident and health. 

As a regulatory agency within the Executive Office of Consumer Affairs and 
Business Regulation, the Division of Insurance is charged with protecting the 
insurance consumer in the context of a healthy and responsible insurance 
market. It is a task which requires a careful balancing of efforts to keep 
insurance costs as affordable as possible while making sure that insuring 
entities remain financially sound. This is accomplished through the following 
activities: 



■ Regulating the rates charged by insurers for certain types of insurance, 



■ Examining the financial qualifications of insurance entities seeking 
to conduct business in the Commonwealth, 



■ Licensing and authorizing qualified insurance companies, Health 
Maintenance Organizations and Preferred Provider Arrangements, 



■ Inspecting insuring entities for their ability to fulfill financial and 
administrative obligations to policyholders, 



■ Licensing qualified persons to act as agents, brokers, public fire 
loss adjusters, insurance advisors and motor vehicle damage 
appraisers, 

■ Reviewing and approving policy and rate filings to be used by insurers, 



■ Enforcing the insurance laws through investigative and disciplinary 
activities, 

■ Resolving consumer complaints against insurers and providers and, 

■ Cooperating with other state agencies, boards and organizations on 
various insurance-related issues. 

The following Annual Report outlines the important strides made by the 
Massachusetts Division of Insurance during 1988. 



5 



■ The Division's approval for the creation of Arbella 
Mutual Insurance Company, a strong and finan- 
cially viable replacement company for the exiting 
Kemper Group, ensured that all outstanding ob- 
ligations to Kemper's Massachusetts policyhold- 
ers would be fulfilled. 

■ The Division began an intensive investigation 
into numerous allegations of wrongdoing by the 
Balboa Insurance Company. The investigation 
was concluded in mid-1 989, when the company 
signed a consent order agreeing to the largest 
financial settlement ever obtained by the Division 
in an enforcement proceeding. 

■ $486,050 was recovered for consumers who filed 
claim complaints with the Division. 

■ In the spring of 1988, the Division initiated a 
market conduct examination of five insurance 
companies selling mass-market life and accident 
and health insurance in the Commonwealth. The 
examination was undertaken primarily as a result 
of the Division's review of advertising materials 
disseminated to consumers through the media 
and mail, and the perception that the products in 
question were marketed to elderly populations 
who require vigorous consumer protection. 

■ New changes to the Safe Driver Insurance Plan 
allow safe drivers to realize an increased savings 
in their 1 989 automobile insurance premium. In 
addition to the 3-Year Credit, the credit catego- 
ries for safe driving were expanded to include a 
4-Year Credit and an Excellent Driver Award 5- 
Year Credit worth up to $120.00. 

I The Division issued a regulation pursuant to a 
1987 statute, mandating coverage for non- 
experimental infertility procedures, such as in- 
vitro fertilization, artificial insemination and gam- 
ete intra-fallopian transfer (GIFT). 



I Consumers who install certain types of anti-theft 
mechanisms in their vehicles were previously 
eligible for a 5%-20% discount on comprehen- 
sive automobile coverage. In 1 988, the possible 
discount increased to up to 35%, when the regu- 
lation was amended to include signal-activated 
recovery systems. 

■ The Division promulgated regulations which 
oversee the licensure and operation of Preferred 
Provider Arrangements (PPAs). 

■ The Board of Appeal on Motor Vehicle Liability 
Policies and Bonds conducted a total of 37,753 
hearings throughout the state. These included 
33,225 Safe Driver Insurance Plan surcharge ap- 
peals, 4,212 appeals of decisions of the Regis- 
trar of Motor Vehicles and 316 appeals of auto- 
mobile insurance cancellations. 

■ Following the Legislature's passage of the Auto- 
mobile Insurance Reform Act in November, the 
Division responded quickly and effectively to 
ensure that the law's many provisions could take 
effect for the beginning of the 1 989 policy year. 

■ The Field Audit Section and Health Policy Unit 
developed and implemented a standardized audit 
protocol for the financial and operational aspects 
of Health Maintenance Organizations. 

I The Commissioner issued the 1 989 private pas- 
senger motor vehicle insurance rates in Decem- 
ber. The 8.2% rate decrease was made possible 
as a result of the savings to the system provided 
by the Automobile Insurance Reform Act of 1 988. 



■ The automation of certain functions in company 
licensing, policy and rate approval and agent 
and broker licensing, enhanced service to licen- 
sees. 

■ During the first year of the Records Management 
Project, the Division processed approximately 
400 square feet of inactive records for storage at 
the State Records Center. Several documents 
detailing the administrative business of the agency 
during the mid-nineteenth and early twentieth 
centuries were discovered to be historically valu- 
able and transferred to the Massachusetts Ar- 
chives. 

■ The implementation of the unisex regulation made 
Massachusetts the first state to prohibit by regu- 
lation, the use of sex, race, color, religion, marital 
status and national origin as a basis for setting in- 
surance premiums and benefits for individual 
and group insurance products. 

■ The State Rating Bureau implemented new pro- 
cedural and technical guidelines for health, life 
and property and casualty form and rate submis- 
sions. 

■ The Division installed a telephone system with 
the first automated attendant in use in the Com- 
monwealth's government offices. The automated 
attendant allows callers using a touch tone phone 
to choose the department directly from a menu. 
The cost effective system has enabled more 
consumers quicker and easier access to the 
appropriate agency section. 



COMPANY LICENSING 
AND 
FINANCIAL 
SURVEILLANCE 



Below is a list of those insurance 
companies licensed or author- 
ized and inactivated by the Com- 
pany Licensing and Financial 
Surveillance Section during 1988. 

COMPANIES LICENSED/AUTHORIZED 

Allied Insurance Company 
American Enterprise Life 

Insurance Company 
American Franklin Life 

Insurance Company 
American Modern Home 

Insurance Company 
Arbella Mutual Insurance Company 
Atlantic Casualty and Fire 

Insurance Company of Savannah 
Banner Life Insurance Company of New York 
Bausch and Lomb Insurance Company 
Contractors Bonding and 

Insurance Company 
Hafleysville Insurance Company 

of New Jersey 
Harleysville Mutual Insurance Company 
Hartford Underwriters 

Insurance Company 
Huron Insurance Company 
League Life Insurance Company 
Liberty National Fire Insurance Company 
Madison National Life Insurance Company 
Minnesota Mutual Fire and Casualty 

Insurance Company 
North Atlantic Life Insurance 

Company of America 
Ohio Indemnity Company 
Pilgrim Insurance Company 
PM Group Life Insurance Company 
Stonewall Surplus Lines Insurance Company 
Taisho Marine and Fire Insurance 

Company of America 
Transamerica Reinsurance Company 
USAA General Indemnity Company 

COMPANIES INACTIVATED 

American Independent 

Reinsurance Company 
Balboa Insurance Company 
Cellna Mutual Insurance Company 
F-Xcelsior Insurance Company 
Inter-Ocean Insurance Company 
Netherlands Insurance Company 
New York Underwriters 

Insurance Company 
Peerless Insurance Company 
Utica Fire Insurance Company 

of Oneida County, New York 
Whiting National Insurance Company 
Taisho Marine and Fire 

Insurance Company, Ltd 



The Company Licensing and Financial Surveillance Section is respon- 
sible for ensuring that only those companies which are financially 
sound are licensed or authorized to transact business in the Common- 
wealth. 

The Section reviews and processes new company licenses and li- 
cense amendments, renews existing licenses, processes certifica- 
tions, collects and records fees and keeps other state agencies in- 
formed of the status of licensed and authorized companies, including 
name and address changes. The Section examines annual company 
financial statements in order to identify solvency problems. In addition, 
staff members monitor transactions involving security deposits made 
by insurers doing business in the Commonwealth, including an annual 
review and adjustment of deposits made by insurers writing workers' 
compensation insurance. 

Along with performing the many tasks described above, during 1988 
the Section undertook several initiatives designed to improve its opera- 
tions. 

Personal computers have been introduced to the Section, enabling the 
use of automated systems to handle certain licensing functions. For in- 
stance, the Section collects and records several hundred thousanc 
dollars in licensing-related fees annually. In 1 988, the manual systerr 
for recording fees was replaced with an automated ledger, making fee 
collection more efficient. 

Also during 1 988, the Section updated procedures for the formation o 
domestic insurance companies, developed new guidelines for the re 
domestication of licensed, foreign insurers, established additional re 
quirements for annual financial reporting by licensed and authorizec 
insurers and began a general revision of foreign company licensing 
procedures aimed at streamlining the licensing process. 

The Section plans to enhance its computer capabilities further to pro 
vide additional, needed automation. Also, the Section will complete it; 
revision of licensing procedures. 



FIELD AUDIT 



The Field Audit Section is responsible for ensuring that Massachusetts 
is serviced by financially sound insurance companies, dental services, 
Savings Bank Life Insurance departments, rating bureaus, fraternal 
benefit societies, Health Maintenance Organizations and other insur- 
ance entities. This is accomplished through on-site audits of financial 
statements submitted annually by these entities. 

The Field Audit examiners utilize a model financial examination meth- 
odology developed by the National Association of Insurance Commis- 
sioners (NAIC), to ensure that these institutions are fulfilling their 
statutory responsibilities to charge approved and reasonable rates; to 
pay claims promptly and completely; to conduct proper bookkeeping 
procedures; and to comply with all applicable laws and regulations. 
Upon completion of an audit, the examiners prepare and present a 
report of findings and recommendations to the institution's Board of Di- 
rectors. The recommendations are then reviewed by the institution 
and the Division in order to clarify the institution's compliance respon- 
sibilities. 

In 1 988, the Field Audit examiners conducted the first two financial ex- 
aminations of Health Maintenance Organizations. The Section is 
working with the Health Policy Unit to clarify the examination procedure 
further and to establish a regular schedule for conducting the examina- 
tions. 

In addition to conducting on-sight examinations, the Field Audit staff 
and the EDP staff have begun the implementation of a computerized 
tracking system which monitors the amount of gross premium written 
less return premiums. It also monitors the collection of the 4% tax which 
special brokers are required to pay on premiums collected in the 
surplus lines market. The tracking system, which helps to identify 
brokers delinquent in payment, has already identified several in- 
stances of non-payment and underpayment of premium tax. 

In 1989, information processing and accessing will be streamlined by 
providing each examiner with a personal computer file, implementing 
a more efficient recordkeeping system and expanding computer stor- 
age capability. 



The Section completed the follow- 
ing audits during 1988: 

Life Companies 6 



Property and Casualty 
Companies 

SBLI Departments 

Fraternals 

Rating Bureaus and 
Associations 

Health Maintenance 
Organizations 



12 
20 
56 



TOTAL 



102 






1 
I 


AGENT AND BROKER 




LICENSING 



Section personnel processed 
over 80,000 licenses in 1988, 
generating $4 million for the 
general fund. 




[ ] Agents 65,488 
Brokers 3,857 
| Advisors + Adjustors 480 
Certifications 10,744 



10 



No person may act as an insurance agent, broker, advisor, fire loss ad- 
juster or motor vehicle damage appraiser in Massachusetts until obtain- 
ing proper authorization from the Commissioner of Insurance. The Agent 
and Broker Licensing Section oversees the licensing and supervision of 
qualified individuals, corporations and partnerships who desire to act in 
these activities. 

To assure that applicants are trustworthy and competent, the licensing 
staff must determine that statutory requirements, such as the completion 
of an approved course of study and written examination, have been ful- 
filled. The Section monitors pre-licensing and continuing education and 
administers and/or oversees the testing, scoring, and grading proce- 
dures. Although the Section utilizes the services of the Educational Test- 
ing Service to administer the examinations for agents and brokers, all ad- 
visor, adjuster and motor vehicle damage appraiser exams are written, 
administered, corrected and graded by the Agent and Broker Licensing 
Section. 

Licensing of individuals as insurance agents and appointing those 
agents to one or more insurance companies constitutes the Section's 
largest volume of work. Assisted by an automated system, the staff was 
able to process the approximately 500 applications for agent appoint- 
ments received by the Division each week, within 1 5 days from date of 
receipt. In 1988, $3,274,400.00 was generated for the Commonwealth's 
General Fund from the 65,488 new and renewed licenses issued to insur- 
ance agents alone. 

Although processing broker and corporation licenses remained a man- 
ual chore until mid-1 988, the licensing staff issued 3,857 broker licenses 
that year. The conversion of the records to a computer system has re- 
sulted in improved service to licensees and more streamlined recordkeep- 
ing. 

Further automation is being planned in conjunction with the National As- 
sociation of Insurance Commissioners (NAIC). The project, a national 
data base for all insurance licensees, will make vital pre-licensing infor- 
mation more readily accessible to all state insurance departments. The 
NAIC file will also be used to collect disciplinary data on licensees under 
investigation by the Division. 

The Section generated close to $4 million from the licenses issued during 
calendar year 1 988. Veterans are exempt from paying the broker license 
fee, hence, the revenue generated from this source is less than the 
number of licenses issued indicates. 



The Section is also responsible for processing letters of good standing 
for agents and brokers. The staff processed over 10,700 certification 
letters in 1 988. 

In addition to its oversight of these licensees, the Division regulates the 
licensing of motor vehicle damage appraisers through the Motor Vehicle 
Appraisers Board and its support staff within the agency. Four of the five 
Board members are appointed by the Governor. The fifth, who serves as 
the Board's chairperson, is appointed by the Commissioner. 

The Board is charged with instituting and maintaining minimum stan- 
dards of conduct for motor vehicle damage appraisers in Massachu- 
setts. It conducts licensing examinations, issues and renews appraisers' 
licenses and processes applications. The Board may revoke, cancel and 
suspend licenses following a hearing. In addition, the Board sets licens- 
ing eligibility requirements, approves training programs and establishes 
license revocation guidelines. 

As a result of the 1 988 automobile reform legislation, several of the pro- 
cedures for repairing damaged vehicles were amended. In addition to 
creating new cost saving options such as the direct pay and referral list 
programs, the law also enhanced the Motor Vehicle Damage Appraiser 
Board's administrative responsibilities by expanding its disciplinary au- 
thority, amending appraiser registration procedures and requiring parts 
recording by repair shops. The Board will implement these initiatives in 
1989. 

The entire Agent and Broker Licensing staff was awarded a Citation for 
Outstanding Performance for their commitment to the speedy and accu- 
rate issuance of new and renewed licenses in 1988. 



CONSUMER SERVICE 



The Consumer Service Section is responsible for responding to con- 
sumer inquiries and resolving complaints against insurers, agents and 
brokers on behalf of consumers. The Section is not only a resource for 
general insurance information, but the staff also assists consumers in 
understanding their rights under Massachusetts laws and regulations 
and the provisions of their policies. 

In the demanding role of a consumer service staff member, listening and 



11 



CONSUMER SERVICE 



communication skills are vital to resolving complaints. Section person- 
nel are trained to interact with the public in an alert, patient and under- 
standing manner when fielding complaints and questions over the tele- 
phone, by letter or during an in-person interview. Although the Section 
cannot provide the legal services which are sometimes required to re- 
solve more complicated issues, the examiners resolve a substantial 
number of cases yearly. In 1 988, $486,050 was recovered as a result of 
the 7871 cases closed by the examiners. The Section also fielded 90,440 
telephone calls and issued numerous information letters. 

To assure the most prompt, accurate and consistent responses to 
consumer questions, the Consumer Service Section has developed a 
program to educate its staff members in specialized aspects of insur- 
ance. As part of this Insurance Service Training Program, guest speak- 
ers from other agencies and from within the Division share their expertise 
on new and changing areas of insurance law and practice, such as auto 
reform, health care and the Safe Driver Insurance Plan. In addition, the 
Section is developing a central reference manual by collecting insur- 
ance-related memos, fact sheets, pamphlets, regulations and statutes. 
The manual will provide the examiners quicker and easier access to 
helpful consumer information. 

In order to monitor more closely consumer complaints which may require 
investigative or legal action, the Consumer Service Section was reorgan- 
ized under the Legal Section in 1988. Whenever the central complaint 
log reveals a pattern of allegedly unfair or abusive practices by a particu- 
lar insurance agent, broker or company, the Special Investigations Unit 
(SIU) in the Legal Section is alerted. In 1 988, the Consumer Service Sec- 
tion was responsible for reporting a pattern of non-conformity by a large 
life underwriter to the chief enforcement counsel and for assisting in the 
SlU's subsequent investigation of the company. Also, because these 
patterns may suggest trends in the industry which require further legis- 
lative or regulatory action, the Section provides the Commissioner with a 
monthly status report of complaint statistics. 



STATE RATING 
BUREAU 



Since it was established by the Legislature in 1975, the State Rating 
Bureau (SRB) has provided the Division with professional actuaries, 
mathematicians, computer analysts, attorneys and support staff, re- 
sponsible for investigating and reviewing the rates and policies utilized 



12 



by companies for various types of insurance. These duties are carried 
out by the rating and policy review staffs. 

A primary function of the SRB is its participation in the rate regulation pro- 
ceedings for various types of insurance, including private passenger 
automobile, medical malpractice, homeowners, Blue Cross/Blue Shield 
Medex (Medicare supplement), nongroup health, Health Maintenance 
Organizations and workers' compensation insurance. The Section also 
analyzes numerous property/casualty rate filings submitted by Insur- 
ance Services Office (ISO) and independent insurers. 

As a statutory party to the annual private passenger motor vehicle insur- 
ance rate hearing, the SRB prepares and submits to the Commissioner 
its own rate proposal, provides a thorough analysis of the industry's rate 
filing and provides expert testimony on the various filings. The Section is 

I' involved in other related matters including, recommending to the Com- 
missioner any necessary changes in the territorial rating assignments, 
participating in the annual hearing to determine whether the Commis- 
sioner should continue to fix and establish rates and conducting an 

1 actuarial review of the competitive rate filings providing commercial 
motor vehicle insurance. 

During 1 988, the SRB analyzed and quantified the effects of various leg- 
islative automobile insurance reform proposals for their potential savings 
effect on automobile insurance rates. These efforts helped bring about 
the Automobile Insurance Reform Act of 1 988. In addition, the SRB was 
an active participant in the negotiations with the insurance industry on 
the savings consumers could realize as a result of the new legislation. On 
average, these savings amounted to 1 6% in lower automobile insurance 
premiums for Massachusetts policyholders, or a total savings of approxi- 
mately $400 million. 

• The SRB is also responsible for reviewing and approving or disapproving 
a broad range of policy filings submitted by insurance companies doing 
business in the property/casualty, accident & health and individual life & 
annuity insurance areas. The staff ensures that the thousands of policy, 
rate and other filings received annually, are in compliance with the Com- 
monwealth's insurance laws. 

Several administrative changes were made to the policy review staff in 
1988, thus improving the efficiency and productivity of the entire staff. 
Most notably, an automated system capable of tracking the receipt and 
final disposition of all submissions was developed by EDP personnel. 
Also, procedural and technical guidelines for life, health and property 
and casualty form and rate submissions were implemented. This in- 



STATE RA TING BUREA U 



volved a major restructuring of the filing system and standardization of 
the filing guidelines. 

A significant challenge which faced the policy review staff was the review 
of new policy forms submitted by insurance companies in compliance 
with a newly promulgated anti-discrimination insurance regulation. The 
regulation was designed to provide gender neutral rates in life and health 
insurance for men and women. Some 1 600 unisex life and 650 unisex 
health policies were approved by the Section in 1 988. 

If staffing levels permit, in addition to continuing these activities, the State 
Rating Bureau plans to work with the Legal staff in drafting regulations 
concerning such issues as universal life insurance and credit life insur- 
ance. 



BOARD OF APPEAL 
ON MOTOR VEHICLE 
LIABILITY POLICIES 
AND BONDS 



The Board of Appeal on Motor Vehicle Liability Policies and Bonds was 
established to hear appeals of surcharges under the Safe Driver Insur- 
ance Plan (SDIP), decisions of the Registrar of Motor Vehicles and 
automobile insurance policy cancellations. 



The vast majority of appeals heard by the Board involve challenges to 
surcharges imposed under the Safe Driver Insurance Plan, an incentive 
program which awards Safe Driver Credits and imposes Unsafe Driver 
Points to promote more careful driving habits. In 1 988, the Board sched- 
uled appeal hearings for 33,225 merit rating surcharges, 4,21 2 Registrar 
decisions and 316 policy cancellations. 

The Safe Driver Insurance Plan requires that an insurance company 
determine who is at-fault for any accident resulting in a collision or 
property damage claim of $200 or more, and whether the operator and/ 
or policyholder should be assessed a surcharge. The determination of 
fault must be in accordance with the Standards of Fault promulgated by 
the Board. 



Once the company determines fault, it issues a surcharge notice, inform- 
ing the policyholder of the company's decision to impose a surcharge. 



14 



The surcharge notice contains the reason for the surcharge, an explana- 
tion of the right of appeal, and an appeal form with filing instructions. In 
1 988, the Board of Appeal provided appellants with a new form for filing 
a written affidavit in lieu of appearing in person at the appeal hearing. Al- 
though submitting an affidavit was previously an option for appellants, a 
significant increase in hearing requests prompted the Board to encour- 
age actively the form's use as a time-saving and efficient alternative for 
both the consumer and the Board. As a further convenience to appel- 
lants, surcharge hearings are held in 1 2 locations throughout the Com- 
monwealth by individual Board Members Hearing Officers, and the Ex- 
ecutive Secretary. 

Following an appeal hearing, a Finding and Order, or decision, is sent to 
the appellant, the insurance company, and the Merit Rating Board. If the 
appellant wins the appeal, the Merit Rating Board removes the at-fault ac- 
cident from the operator's driving record. 

The Board of Appeal support staff currently processes every hearing 
docket without automated assistance. Because this involves a substan- 
tial amount of paper, the staff is planning to transfer the dockets from 
manual logging to a computerized data base, thus allowing faster proc- 
essing and accessing. The system will also enable the Board to generate 
a more comprehensive hearing docket by providing access to driver in- 
formation provided by the Merit Rating Board. 

With some differences, the appeal process for automobile insurance 
cancellations and decisions of the Registrar of Motor Vehicles is similar 
to that for SDIP surcharge appeals. Appellants also have the option of 
appealing Board decisions to the Massachusetts Superior Court. Of the 
4,000 appeals of Registry decisions heard by the Board of Appeals in 
1988, only twenty cases were appealed to Superior Court. None was 
reversed. 



SDIP 
Surcharge Appeals 
Process 



Notice of Surcharge issued 
by insurance company 



Insured files 
written appeal with Board 
of Appeal within 30 days 



Hearing held in one of 12 
locations throughout the 
Commonwealth 



Surcharge affirmed or 
reversed 



Further appeal to Superior 
Court 



MEDIC A 


L MALPRACTICE 


ANAL 


YSIS BUREAU 





The Medical Malpractice Analysis Bureau was established by the Medi- 
cal Malpractice Reform Law, which went into effect on July 1 , 1 986. The 
Bureau's chief responsibility is to support the Commissioner in his duty 
to fix and establish rates charged by the Medical Malpractice Joint 
Underwriting Association (JUA). The JUA was established by the Legis- 
lature in 1975 in response to the unwillingness of many insurance 



15 



MEDICAL MALPRACTICE 
ANALYSIS BUREAU 



companies to continue providing professional liability coverage for 
physicians and hospitals. 

The Bureau collects and analyzes data on medical malpractice insur- 
ance rates for those groups insured by the JUA, physicians, surgeons, 
hospitals, community health centers, dentists, nurse-midwives and any 
other appropriate group which the Commissioner may consider for 
inclusion in the JUA. A full ratemaking proceeding is held annually for 
each group. The proceedings include major rate filings, extensive com- 
ment and testimony, legal rulings and written decisions. 

In 1988, in addition to rate proceedings for each of these groups, the 
Bureau investigated a number of technical ratesetting issues for the 
purpose of improving the ratesetting process. One notable issue was 
that of experience ratesetting pricing. The Medical Malpractice Reform 
Act of 1 988 directed the Commissionerto examine the feasibility of estab- 
lishing a system of determining physician malpractice rates, surcharges 
and credits according to actual claims experience. Under an experience 
rating system, physician premiums would vary on the basis of actual 
claims experience rather than on the basis of specialty risk classifica- 
tions. After analyzing statistical data presented at the physicians' rate 
hearing, Bureau staff concluded that the available data on experience 
rating was not sufficient to include an experience rating component in the 
rate setting process for the 1 989/90 rate year. 

A key component of the ratesetting process involves determining rates 
for increased limits of coverage above basic levels. Because losses in 
high risk classes tend to be larger, physicians in these classifications are 
likely to purchase more of this type of coverage. The cost of increased 
limits coverage, however, has not kept pace with overall rate increases, 
thus causing many physicians to purchase only basic coverage. In order 
to prevent rate subsidization of high risk physicians by physicians 
purchasing basic limits coverage, the rate is adjusted by the Buearu. In 
1988, the Bureau's collaboration with the Medical Malpractice JUA and 
the Massachusetts Medical Society resulted in across-the-board coordi- 
nation of rates and a virtual elimination of subsidization. 

Also in 1988, the Bureau reorganized the process by wh;«.h insureds, 
dentists, insurance agents and member companies resolve disputes 
with the JUA. The more efficient procedures allow disagreements 
involving such issues as proper risk classification and deferred premium 
payments, to be resolved without the formal intervention of the Commis- 
sioner. 



I I. 

ADMINISTRATION 



Responsible financial management, comprehensive personnel admini- 
stration and an effective automated network are the major priorities of the 
Administration Section. The Section is also the central caretaker of other 
office support functions, such as the distribution of internal and intra- 
agency mail and the procurement of supplies. 

Management of the Division's fiscal elements is one of the Administration 
staff's most vital responsibilities. The Section collects and accounts for 
a substantial amount of revenue generated through licensing, examina- 
tion and filing fees and statutorily mandated assessments. The Admini- 
stration staff also assesses the fiscal needs and priorities of the Division 
and recommends appropriate allocation of funds for the purpose of the 
annual budget. During the 1988 fiscal year, in addition to managing a 
budget of $5.8 million, the Section accounted for nearly $21 million in 
revenue. 

The Administration Section also provides numerous personnel services 
to Division employees. In addition to its responsibilities involving payroll 
and employee benefits, the Section coordinates personnel seminars and 
courses designed to enhance on-the-job skills and performance. The 
Section assures the participation of the Division's supervisors and man- 
agers in the Performance Management System (PMS) and Employee 
Performance Review System (EPRS), statewide programs designed for 
improving goal orientation and goal achievement in the workplace. In 
1989, the staff will produce an employee handbook, designed to inform 
Division personnel about the Commonwealth's various employee bene- 
fits, policies and procedures. 

The Electronic Data Processing (EDP) staff within the Administration 
Section is responsible for all facets of the Division's computer system. 
The EDP staff strives to accommodate the numerous and varied needs 
of the Division through the reporting of information critical to the agency's 
service to the Commonwealth. Along with installing and maintaining the 
computer systems that store this information, the EDP staff creates, 
updates and refines computer programs for tracking word processing 
documents, financial data records and agent, broker, company and 
organization licensing records. 

In 1988, the EDP staff made significant strides in both hardware and 
software applications by providing users with increased access to the 
Division's automated information and greater technical options in work 
assignments. In addition to the acquisition of a Wang VS 7110 mini- 
computer and 7 workstations, the storage capacity of the system was 
increased from 226 Megabytes to 776 Megabytes. Also, a new computer 
link with the National Association of Insurance Commissioners (NAIC) 



Additional hardware and in- 
creased users access streamlined 
productivity and enhanced effi- 
ciency throughout the division. 

WANG VS SYSTEM USE 




TERMINALS PRINTERS USERS 
M 



DECEMBER 1987 
DECEMBER 1988 



17 



ADMINISTRATION 



now permits up to the minute retrieval of data from any state or territory 
in the United States and provides a forum for information sharing 
between states on insurance issues. 

The EDP staff will revise several modules on the Wang system in 1 989, in 
compliance with legislative changes which demand frequent updates in 
information processing, and an increasing number of time-demanding 
user requests. These changes will facilitate data entry and produce 
requested reports. 



HEALTH POLICY 



In 1 984, in order to meet the needs of a growing community of health care 
plans and consumers, the Division organized a specialized staff respon- 
sible for coordinating and implementing oversight of the Common- 
wealth's health insurance industry. The Health Policy Unit is responsible 
for the regulation of Health Maintenance Organizations (HMOs), Blue 
Cross and Blue Shield, commercial insurers' health plans and as of 1 988, 
Preferred Provider Arrangements (PPAs). Most notable among the 
Section's 1988 accomplishments was its participation in the expansion 
of regulatory oversight of several significant health insurance areas. 

In response to elders' increasing inability to afford the rising out-of- 
pocket expense of long-term health care, the Section drafted the regula- 
tion, 21 1 CMR 65.00 Long-Term Care Insurance, which aims to protect 
consumers against abuses in the sale and marketing of long-term care 
insurance, while allowing insurers to be innovative in a responsible way. 
In 1989, the Health Policy staff, in cooperation with the Executive Office 
of Elder Affairs, will publish a consumer brochure explaining the benefits 
and limitations of this type of insurance. 

Also in 1988, the Health Policy Unit completed a major study of the Pre- 
ferred Provider Arrangement (PPA), a health insurance entity burgeon- 
ing throughout the country, and with the Legal Section, promulgated a 
comprehensive regulation to oversee their proper licensing and opera- 
tion in the Commonwealth. The Health Policy staff was expanded to 
ensure the timely and thorough examination of the significant number of 
PPA applications received by the Division. Actual licensing of PPAs is 
expected to begin in 1989. 

The Health Policy Unit and Legal Section also drafted amendments to the 
Commonwealth's Medicare regulation as required by the Medicare Cata- 



strophic Act of 1 988, the most significant change in the program since its 
inception in 1 965. During the next several years, the staff will be required 
to amend the regulation further in order to maintain its compliance with 
the federal initiative. 

Working with the Field Audit staff, the Health Policy Unit has developed 
a standardized audit protocol for both the financial and operational 
aspects of Health Maintenance Organizations. The purpose of the 
protocol is to assure regular and standardized examinations of these or- 
ganizations as required by statute. Two HMOs have been audited using 
the new procedures. 

In addition to these activities, the Health Policy Section is active in 
cooperative efforts with other state agencies and committees, including 
the Executive Office of Elder Affairs, the Group Insurance Commission, 
the Governor's Task Force on AIDS, the Special Commission on Health 
Insurance Reform and the Special Commission on Elderly Health Care. 
The staff has also started an informational meeting series with represen- 
tatives from the Consumer Service Section. Not only do the meetings 
enable the Health Policy staff to share new information with the consumer 
examiners directly, but more importantly, the examiners are able to alert 
the Health Policy staff of complaint trends in the health insurance 
industry which may require the Division's immediate attention. 

In addition to continuing the HMO examinations and PPA licensure proc- 
ess, the Health Policy staff will continue its regulatory activities in 1 989 by 
revising the regulation governing the oversight of HMOs to strengthen 
financial standards and monitoring and finalizing the long-term care 
regulation. Another priority is a bill regulating continuing care retirement 
communities, a type of elderly housing facility with health care arrange- 
ments providing access to long term care services, including nursing 
home care, in-home care, personal care and homemaking. 




LEGAL 



The Division's Legal Section provides the Commissioner of Insurance 
with legal advice in his duties as regulator of the Commonwealth's insur- 
ance industry. Staff lawyers participate in adjudicatory, regulatory and 
administrative hearings concerning the enforcement and administration 
of the insurance laws. The Section drafts and amends regulations, tracks 
legislation and interprets state and federal insurance statutes, as well as 
assists other sections within the Division whenever a legal interpretation 
or opinion is required. 



19 



LEGAL 



The Legal Section was a key participant in a number of challenging 
insurance issues in 1 988, including, attempts by automobile insurers to 
withdraw from the Massachusetts automobile insurance market, the 
automobile insurance reform initiative and the 1 987 and 1 988 automobile 
insurance remand orders and rate hearings. The Legal and Health Policy 
staffs promulgated regulations expanding the Division's oversight in the 
health insurance area. 

The Special Investigations Unit (SIU), which investigates allegations of 
wrongdoing by insurance licensees, works in conjunction with the Legal 
Section's Chief Enforcement Counsel. The SIU acts as a watchdog for 
fraud and abuse in the insurance market and its investigative activities 
serve to deter violations of the insurance laws. In 1 988, following inves- 
tigations completed by the SIU, the Legal Section filed seventeen admin- 
istrative complaints against licensees for varied allegations of wrongdo- 
ing. The Commissioner's Hearing Officer imposed $56,000 in discipli- 
nary fines against licensees as a result of those cases disposed of in 
1988. 

During 1 988, the Legal Section also developed and filed a major enforce- 
ment action against a foreign insurance company that ultimately led to a 
settlement in 1 989, under which the company agreed to pay approxi- 
mately $130,000 in outstanding claims and $200,000 in expenses. Fur- 
thermore, in January 1 989, the Division concluded a substantial enforce- 
ment action undertaken in 1 988, in which a licensee was fined $34,000 for 
failure to demonstrate the qualities of trustworthiness, competence and 
suitability required of insurance agents under the insurance laws. 

In 1 989, the Legal Section plans to promulgate regulations concerning 
the use of AIDS-related information, the coordination of benefits and the 
regulation of variable life insurance, in addition to implementing the pro- 
visions of the automobile insurance reform law, the Preferred Provider Ar- 
rangement regulation and the Infertility Benefits regulation. Also, the 
Section plans to expand regulatory oversight for the operation and finan- 
cial condition of HMOs and the leasing of retail space by insurance 
companies and agents from financial institutions. Recommendations 
will also be formulated for reducing the impact Commonwealth Automo- 
bile Reinsurers (CAR) has had on the Massachusetts automobile insur- 
ance market. 



The cooperative efforts of the Division's attorneys, hearing officers, investigators, technical personnel and support staff 
were responsible for the following legislative, regulatory, enforcement and administrative actions during 1 988. 



ACTS AND RESOLVES OF 1988 



The General Court passed and the Governor approved the following insurance-related legislation: 
Chapter 21 An Act Relative to Medex Insurance 

Chapter 23 An Act to Make Health Security Available to all Citizens of the Commonwealth and to Improve 
Hospital Financing 

Chapter 1 60 An Act Relative to the Merger of Nonprofit Hospital Service Corporations and Medical Service 
Corporations 

Chapter 1 89 An Act Creating the Arbella Insurance Company 

Chapter 227 An Act Relative to the Board of Appeal on Motor Vehicle Liability Policies and Bonds 

Chapter 229 An Act Relative to Certain Proprietary Information of Insurance Agents and Brokers Relating Only 
to Property and Casualty Insurance 

Chapter 273 An Act Relative to Motor Vehicle Insurance 

Chapter 282 An Act Providing for Enhanced Enforcement of Motor Vehicle Insurance Laws 
Chapter 295 An Act Relative to False Health Claims 



CODE OF MASSACHUSETTS 
REGULATIONS 



The Commissioner is charged with the statutory authority to issue regulations which supplement the insurance laws. 

The following regulations were promulgated in 1988: 



211 CMR 32.00: 
211 CMR 37.00: 
211 CMR 42.00: 

211 CMR 47.00: 
211 CMR 51 .00 
211 CMR 86.00: 

211 CMR 94.00: 
211 CMR 120.00: 

211 CMR 123.00: 



Used Blended 1980 CSO and CET Mortality Tables, amended 
Infertility Benefits 

Minimum Standards of Full and Fair Disclosure for Form and Contents of Accident and Sickness 
Insurance Sold in the Commonwealth of Massachusetts 

Individual Accident and Sickness Insurance, amended 

Preferred Provider Arrangements (PPAs) 

Reductions in Premium Charges for Private Passenger Motor Vehicles and Certain Commercial Motor 
Vehicles Equipped with an Anti-Theft Mechanism, amended 

Mandatory Pre-lnspection of Private Passenger Motor Vehicles 

Procedures Concerning Rate Filings Initiated by a Medical Services Corporation and/or Hospital 
Service Corporation and the Conduct of Hearings Related Thereto 

Direct Payment of Motor Vehicle Collision and Comprehensive Coverage Claims and Referral Repair 
Shop Programs 



21 



ENFORCEMENT ACTIONS 



Below is a list of disciplinary actions involving the alleged misconduct by agents, brokers, and companies 

which were initiated or resolved in 1988: 

DOI v. Douglas Ryan, Decision issued January 5, 1988 

DOI v. Neal W. Carroll, Consent Order issued February 8, 1988 

DOI v. Marie Kronberg, continued 

DOI v. John Williams, individually and d/b/aThe Highland Company, continued 
DOI v. Frank Staffier, Consent Order issued August 31 , 1988 

DOI v. David A. Hinson, individually and d/b/a/ David A. Hinson Associates, continued 
DOI v. John F. Reardon, continued 

DOI v. Wayne Shatraw and Shatraw Insurance Agency, continued 
DOI v. Richard Delaney, continued 

DOI v. George E. McKenna, Jr. d/b/a George E. McKenna Insurance Agency, George E. McKenna Insurance Agency, Inc., 
Consent Order issued September 21 , 1 988 

DOI v. Thomas E. Rokosz, Decision issued September 30, 1988 

DOI v. Iris B. Morris, individually and d/b/a Iris B. Morris, Decision issued September 30, 1988 

DOI v. John V. McLaughlin, Decision issued October 3, 1988 

DOI v. Phillip S. Newman, Consent Order issued October 10, 1988 

DOI v. Asad Rezvi, Decision issued January 30, 1989 

DOI v. John D. March, Decision issued February 10, 1989 

DOI v. Warner Insurance Company, Decision issued June 29, 1989 

DOI v. Balboa Insurance Company, Consent Order issued June 12, 1989 



DECISIONS AND ORDERS 



The Commissioner is further charged with the authority to covene public hearings and issue decisions 
on a wide variety of insurance matters. Decisions rendered in 1988 are listed below in chronological order: 

Order on Request of the Division of Insurance to Withdraw Approval of Certain Policy Forms of the Central National 
Insurance Company of Omaha. January 7, 1988 

Order on Remand from the Supreme Judicial Court on the request of the Division of Insurance to Withdraw Approval of 
Certain Policy Forms of the American Security Insurance Company. January 14, 1988 

Findings, Decision and Order on Rates for 1988/89, Regarding Medical Malpractice Joint Underwriting Association of 
Massachusetts Dentists' Rates to be effective July 1 , 1988. January 25, 1988 



Findings, Decision and Order on Rates for 1986/87, 1987/88, and 1988/89, Regarding Medical Malpractice Joint Under- 
writing Association of Massachusetts Nurse-Midwives' Rates to be effective July 1 , 1 986, 1 987 and 1 988. 
February 25, 1988 

Deferred Premium Liability Rates and Formulae, Regarding Medical Malpractice Joint Underwriting Association of 
Massachusetts Physicians' and Surgeons' Rates to be effective July 1 , 1988. February 29, 1988 

Limited Practice Discount Proposals, Regarding Medical Malpractice Joint Underwriting Association of Massachusetts 
Physicians' and Surgeons' Malpractice Rates, effective July 1, 1988. February 29, 1988 

Market Share, Allocation and Related Issues, Regarding Medical Malpractice Joint Underwriting Association of 
Massachusetts Blue Shield Subsidies for Dentists to be effective twelve months beginning July 1 , 1988. 
March 1, 1988 

Experience Rating Pricing, Regarding Medical Malpractice Joint Underwriting Association of Massachusetts Physicians' 
and Surgeons' Rates to be effective July 1 , 1 988. March 1 , 1 988 

Opinion, Findings and Decision of 1987 and 1 988 Automobile Insurance Rates. March 10, 1988 

Order Concerning the Amended Filing of Blue Cross of Massachusetts, Inc., and Blue Shield of Massachusetts, Inc. for 
Proposed Nongroup Rates to be Effective on or after April 1 , 1 988. April 8, 1 988 

Findings and Order Concerning the Acquisition of Life of Boston Insurance Company by LBIC Acquisition Corporation 
on Behalf of LBIC Acquisition Corporation and the Laurentean Mutual Insurance. April 11,1 988 

Decision on Appeal from Opinion, Findings and Decision of Hearing Officer on Experience Pricing Rating. May 23, 1988 

Decision on Appeal from Opinion, Findings and Decision of Hearing Officer on Deferred Premium Liability. May 23, 1988 

Opinion, Findings and Decision on the Operation of Competition Among Motor Vehicle Insurers. May 26, 1 988 

Procedures Concerning Rate Filings and the Conduct of Hearings for Workers' Compensation Insurance. June 6, 1 988 

Limited Practice Discount for Non-Academic Physicians, Regarding Medical Malpractice Joint Underwriting Association of 
Massachusetts Physicians' and Surgeons' Rates to be effective July 1 , 1 988. August 23, 1 988 

Opinion, Finding and Order Relative to Rating Territories and Classifications for Automobile Insurance for 1989. 
August 25, 1988 

Decision and Order in the Matter of the Appeal of the Aetna Casualty and Surety Company. September 2, 1 988 

Opinion and Order Relative to Commonwealth Automobile Reinsurers Fleet Rate Filing for Trucks, Tractors and Private 
Passenger Type Vehicles for Commercial Automobile Insurance Policy Year 1 989. September 1 6, 1 988 

Findings and Amended Order Concerning the Acquisition of Massachusetts Life and Indemnity Insurance Company by 
A.L. Williams Corporation. October 13, 1988 

Order Concerning the Amended Filing of Blue Cross of Massachusetts, Inc., and Blue Shield of Massachusetts, Inc. for 
Proposed Nongroup Rates to be Effective on or after November 1 , 1 988. October 21 , 1 988 

Findings and Order Concerning the Acquisition of Massachusetts Indemnity and Life Insurance Company by Commercial 
Credit Group. December 8, 1988 

Opinion, Finding and Decision on 1989 Automobile Insurance Rates. December 15, 1988 

Decision and Order on the Application for Approval of the Arbella Mutual Insurance Company Direct Payment Plan. 
December 30, 1988 

Decision and Order on the Application for Approval of the Kemper National Property and Casualty Companies Direct 
Payment Plan. December 30, 1988 

Decision and Order on the Application for Approval of the Massachusetts Automobile Rating and Accident Prevention 
Bureau Direct Payment Plan. December 30, 1988 

Order Concerning the Filing of the Workers' Compensation Rating and Inspection Bureau for Proposed Workers' 
Compensation Insurance Rates to be Effective on or after January 1 , 1989. December 30, 1988 



COOPERATIVE ACTIVITIES 



The Division of Insurance oversees the operation of a number of legislatively created insurance entities, 
directly participates in the activities of several of the Commonwealth's boards and commissions, and 
participates in informal policy study groups on a variety of insurance issues. Of particular interest and 
importance are the following organizations: 



MEDICAL MALPRACTICE JOINT 
UNDERWRITING ASSOCIATION 

This Association provides medical malpractice 
liability insurance coverage for physicians, hos- 
pitals, and other health care providers, including 
dentists, nurse-midwives, and community health 
centers. Due to adverse voluntary market condi- 
tions, the Association is the only source of medi- 
cal malpractice coverage available to most phy- 
sicians and many hospitals in Massachusetts. 
Of the 1 5 members on the Board of Directors, six 
are appointed by the Commissioner. 



MASSACHUSETTS PROPERTY INSURANCE 
UNDERWRITING ASSOCIATION 
(FAIR Plan) 

The FAIR Plan provides property insurance, in- 
cluding fire insurance, for those residential and 
commercial property owners who are unable to 
obtain coverage in the regular market. Six 
members of the 18-member Board of Directors 
are appointed annually by the Commissioner. 



MOTOR VEHICLE INSURANCE 
MERIT RATING BOARD 

Structurally a part of the Registry of Motor Ve- 
hicles, the Merit Rating Board consists of three 
members: the Registrar of Motor Vehicles, the 
Attorney General, and the Commissioner of In- 
surance. The Board facilitates the implementa- 
tion of the Safe Driver Insurance Plan (SDIP). The 
Board's staff, headed by an Executive Director, 
compiles, gathers and disseminates motor ve- 
hicle operator information to insurers and law 
enforcement agencies for SDIP purposes. 



COMMONWEALTH AUTOMOBILE 
REINSURERS 
(CAR) 

CAR is the residual market for automobile insur- 
ance. The Commissioner appoints its 13-mem- 
berGoverning Committee, hears appeals of Gov- 
erning Committee decisions and approves amend- 
ments to the Plan and Rules of Operation. 



LIQUOR LIABILITY JOINT 
UNDERWRITING ASSOCIATION 

Established in 1985, this Association provides 
liquor liability insurance to liquor licensees who 
are unable to obtain coverage in the regular mar- 
ket. The Commissioner appoints five members 
of the 13-member Board of Directors. 



INSOLVENCY FUNDS 

Both the Life and Health Insurance Insolvency 
Funds and the Massachusetts Insurers Insol- 
vency Fund were created by the Legislature to 
protect consumers against the failure of insurers 
in the performance of their contractual obliga- 
tions due to impairment or insolvency. Each 
Fund is headed by a Board of Directors consist- 
ing solely of insurer representatives. Board 
Members are nominated by the Funds' mem- 
bers/insurers. Appointments to the Boards are 
subject to the Commissioner's approval. 

A Hazardous Waste Insolvency Fund was cre- 
ated by the Legislature in 1 986 to satisfy con- 
sumer claims in the event a hazardous materials 
generator becomes impaired or insolvent. A 9- 
member Board oversees the Fund. Four mem- 
bers are elected subject to the Commissioner's 
approval. 



24 



1 1 

1 


i 


FT 


NANCIAL H 


IG.H. LIGHTS 



The Division generates a substantial amount of annual revenue through 
its licensing, examination, filing and other fees, and charges through 
direct, statutorily mandated assessments against insurance companies. 
These assessments reimburse the General Fund of the Commonwealth 
for expenses of various state boards, agencies and commissions which 
deal with insurance matters. 



FISCAL YEAR 1 988 FINANCIAL STATEMENT 



SOURCE 



INCOME 



Certificates of Authority 


$124,289.90 


Charter 


$10,750.00 


Retaliatory 


$376.00 


Service of Process 


$1 ,475.00 


Annual Statements 


$107,680.00 


Life Insurance Reserves Valuation 


$154,745.64 


Special Brokers Tax 


$6,834,303.16 


Auto Club 


$8,600.00 


D/"\lif»w Cnrm Citinnc 

ruiioy ruiin riiiiiyb 


CpOO,UHU.UU 


Surcharge Appeals 


$317,420.00 


Fines and Penalties 


$8,716.00 


Advisor Licenses 


$44,300.00 


Adjuster Licenses 


$7,900.00 


Agent Licenses 


$3,487,646.59 


Broker Licenses 


$701,725.00 


Company Licenses 


$100,200.00 


Rating Organizations Filings 


$1,140.00 


Advisor Exams 


$4,700.00 


Adjuster Exams 


$950.00 


Fraternal Benefit Society Licenses 


$980.00 


Appraiser Licenses 


$119,911.75 


Appraiser Exams 


$17,000.00 


Domestic Companies Examinations 


$320,397.32 


Miscellaneous 


$52,133.40 


Assessments: 




Fire Fighting Academy 


$822,224.42 


State Rating Bureau 


$802,351.37 


Attorney General 


$458,300.01 


Merit Rating Board 


$6,180,154.24 


Special Automobile Commission 


$1,322.66 


Special Medical Malpractice Commission 


$103,560.94 


State Fire Marshall Arson Program 


$59,476.93 


TOTAL 


$20,922,770.33 



Below, a bar graph illustrates that 
during the past several years, 
revenues collected by the Divi- 
sion have steadily increased, 
while the operating budget has 
remained essentially level. 




FY 86 FY87 FY 88 

■ BUDGET YM REVENUE 




COMMONWEALTH OF MASSACHUSETTS 
MICHAEL S. DUKAKIS, GOVERNOR 

EXECUTIVE OFFICE OF CONSUMER 
AFFAIRS AND BUSINESS REGULATION 
MARY ANN WALSH, SECRETARY 

DIVISION OF INSURANCE 
TIMOTHY H. GAILEY, COMMISSIONER 



5 / 



MASSACHUSETTS 
DIVISION OF INSURANCE 

280 FRIEND STREET 
BOSTON, MASSACHUSETTS 
02114 

(617) 727-7189